Commentary

Bernanke Defends the Fed

Fed Chairman Ben Bernanke stepped back into the realm of politics yesterday with an op-ed in the Washington Post. In his piece he defends the Federal Reserve’s response to the crisis as “distasteful and unfair” but “unfortunately necessary.” He goes on the attack against Congressional moves to shift bank regulatory supervision from the Fed to a new agency. And he lays out what steps the Fed has taken to move financial services reform along ahead of any action by the House or Senate:

Working with other agencies, we have toughened our rules and oversight. We will be requiring banks to hold more capital and liquidity and to structure compensation packages in ways that limit excessive risk-taking. We are taking more explicit account of risks to the financial system as a whole.

We are also supplementing bank examination staffs with teams of economists, financial market specialists and other experts. This combination of expertise, a unique strength of the Fed, helped bring credibility and clarity to the “stress tests” of the banking system conducted in the spring. These tests were led by the Fed and marked a turning point in public confidence in the banking system.

Read Bernanke’s whole op-ed here.