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This is fascinating -- many misunderstandings and superstitions about the Fed's actions and intent cleared away. Please read or watch/listen.
The Fed chief took questions on a range of issues over the course of the town-hall style event, including the toughest moments of the financial crisis in the fall of 2008, missed steps in the subprime mortgage crisis, the impact of the stimulus and TARP programs, and the Fed's independence in establishing monetary policy.
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On the Fed's current actions, Bernanke said the Fed is putting the "pedal to the metal" to support the economy and turn the corner toward growth.
Bernanke expressed particular opposition to a proposal in Congress for the Government Accounting Office to be able to "audit" the Fed's interest rate decisions.
"I don't think that's consistent with independence. I don't think the American people want Congress running monetary policy. That's exactly what (the bill) would do," he said.
His answer to this and other similar questions might interest some folks:
JANELLE SJUE: Hi, I'm Janelle Sjue, a Kansas City mother. I guess I have a couple short questions. First of all, we've given millions - hundreds of millions of dollars of tax money to these large corporations, these behemoths. Is that going to be enough to correct the situation?
And secondly, you know, I'll use the analogy of nature. When a prairie fire burns through, it takes out all the big overgrowth and allows all the small stuff to pop up. Why don't we just let the behemoths lay down and then make room for the small businesses? Thank you.
I find I actually like Benake as he is very direct and honest in his responses. PBS Frontline had a special sometime ago about the financial crisis which goes in great depth on the topic. Much of this info was discussed and explained. While the small businesses do have a great impact. allowing the behemoths to fail would make a great many small business bite the dirt. While it may be repulsive to spend these Billions the alternative is far worse. If you think the financial issue is bad now imagine 40% unemployment, can you guess what would happen to home foreclosures? banks? Car companies? the stock market?
While not the popular choice they are making the right one.
BEN BERNANKE: What we need is a system where the government can say, this [too big to fail] firm is about to fail, we can't let it just fail, but we've got to - we don't want - also we don't want to prop it up either. We need an alternative between bailout and bankruptcy, and that alternative is a system where the government can come in and seize the firm and then unwind it in an orderly way, sell off the assets, and do that in a way that does not cause chaos in the financial markets.
We have a system like that already. Right now the Federal Deposit Insurance Corporation, whenever a small bank or medium-sized bank is about to fail, it can come in before it fails, grab it, sell off assets, pay off the depositors, and this all happens without causing a huge problem in the financial market. That's what we need. And I agree with everyone here, too big to fail is a terrible situation. We've got to fix that. And I think that's the top priority for policy going forward.
Hey, what can you expect from someone who has admitted that he and his wife have been victims of idenity theft??
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