Washington (CNN) - Federal Reserve Chairman Ben Bernanke is warning Congress that the economic outlook remains "unusually uncertain," although he says the Fed is planning for the ultimate withdrawal of the substantial funds it has injected into the financial system since the onset of the economic crisis in 2008.
After Bernanke's statement before a Senate committee Wednesday, stocks turned sharply lower, with the Dow Jones industrial average down more than 100 points.
In prepared testimony for the Fed's semiannual report on monetary policy, Bernanke emphasizes more than once that economic conditions are likely to keep its short-term interest rates at "exceptionally low levels ... for an extended period," explaining that inflation is likely to remain low for several years. At the same time, he offered the most extensive look yet at the Fed's plans and options for pulling money out of the system and raising short-term rates, as the economy improves.
New York (CNNMoney.com) - Federal Reserve Chairman Ben Bernanke said Thursday the central bank is working to increase oversight of financial institutions, even as Congress debates a package of Wall Street reforms.
In a speech at the Federal Reserve Bank of Chicago, Bernanke said he "supports" ongoing efforts in Congress to reform financial regulation. But he added that the Fed is already taking steps to tighten up oversight of the banking system.
"While these legislative steps are necessary, we are not waiting to implement improvements that can be accomplished within our existing authority," he said.
"Now we are working with banks to ensure they improve their risk-measurement and risk management as well as strengthen their liquidity and capital levels while also providing the credit that households and businesses need," the Fed chairman added.
Bernanke said any reform package should give regulators the power to break up financial institutions that could threaten the economy if they fail.
New York (CNNMoney.com) - President Obama plans to nominate three new governors to the Federal Reserve on Thursday, according to sources familiar with the matter.
San Francisco Federal Reserve Bank President Janet Yellen is expected to be nominated as vice chairman of the central bank. And the two vacancies on the seven-member board would be filled by Sarah Raskin, the Maryland Commissioner of Financial Regulation, and Peter Diamond, a professor at the Massachusetts Institute of Technology.
White House press secretary Robert Gibbs said last month that the three were under consideration for the board positions.
NEW YORK (CNNMoney.com) - Alan Greenspan acknowledged Wednesday that mistakes were made during his long tenure as chairman of the Federal Reserve, but he argued that the low interest rate policy he championed at the central bank didn't inflate the housing bubble.
In testimony before the Financial Crisis Inquiry Commission, Greenspan said the recent financial meltdown was possibly "the most severe in history." He admitted that regulators failed to grasp the severity of the crisis, but he maintained that his policies and predictions were correct most of the time.
"When you've been in government for 21 years, as I have been, the issue of retrospect and what you should have done is a really futile activity," Greenspan said. "I was right 70% of the time. But I was wrong 30% of the time, and there were an awful lot of mistakes in 21 years," he added.
Washington (CNNMoney.com) - In what may be the bluntest assessment by a high-ranking White House official of China's exchange rate policy, Treasury Secretary Tim Geithner said Wednesday that China's undervalued currency makes the nation dependent on U.S. monetary policy.
"I think China will be better; they're stronger as an independent country if they're not running an exchange rate policy that, essentially, has the Federal Reserve of the United States setting monetary policy in China," Geithner told CNN's John King in an interview taped for "John King, USA." The interview will air at 7 p.m. ET.
Geithner added that he believes that over time the Chinese will appreciate their currency.
"I think many of them understand and they'll come to decide that it's in their interest, as they move," Geithner said. "I think it's quite likely they move over time."
Washington (CNNMoney.com) - A key banking panel was scheduled to begin consideration Monday of a draft bill of sweeping regulatory changes aimed at warding off future collapses in the financial system.
The bill put forth by Senate Banking Committee Chairman Christopher Dodd, D-Conn., would create a new consumer regulator housed inside the Federal Reserve to ensure consumers get a fair shake with mortgages and credit cards. It would also push banks and financial firms to strengthen capital cushions and create a new process for taking down giant failing companies and preventing future Wall Street bailouts.
The Senate banking panel was scheduled to start meeting at 5 p.m. ET Monday and could pass the bill along party lines as early as this evening. They may move quickly, because the 10 Republicans on the 23-member panel won't offer any changes and plan to oppose the bill, said a source familiar with the negotiations.
Republican lawmakers have told Democrats that they are willing to work with Democrats and hammer out a bipartisan bill before it goes to the floor in coming months, Congressional aides say.
Fed Chairman Ben Bernanke reiterated on Saturday that the central bank should retain power over banks of all sizes. (Getty Images)
New York (CNNMoney.com) - As Congress considers limiting the Federal Reserve's regulatory authority to just the country's largest bank holding companies, Fed Chairman Ben Bernanke reiterated on Saturday that the central bank should retain power over banks of all sizes.
"Because of the remarkable diversity of the U.S. financial system, a supervisory agency that focused only on the largest banking institutions, without knowledge of community banks, would get a limited and potentially distorted picture of what was happening in our banking system as a whole," Bernanke said in a speech to the Independent Community Bankers of America.
The talk echoed points Bernanke has made in several previous speeches, when he has argued that the supervision of small banks helps the Federal Reserve monitor the pulse of the "continent-spanning, highly varied" economy.
Washington (CNNMoney.com) - Fed Chairman Ben Bernanke made his strongest case yet to Congress on Wednesday for the Federal Reserve keeping its regulatory oversight powers over banks large and small.
Bernanke told the House Financial Services panel said he's "quite concerned" about proposals to limit the Federal Reserve's regulatory power to watching out for only the biggest banks. He called the proposal a "bad idea."
"It makes us the 'too big to fail' regulator, and we don't want that responsibility," Bernanke said. "We need a connection to Main Street, as well as Wall Street."
Bernanke said the Fed, alone, has the infrastructure and expertise to keep a close eye on big banks as well as regional and community banks. He suggested that losing the ability to monitor smaller banks would impact the Fed's role in stabilizing the economy.
Washington (CNNMoney.com) - A key Senate banking panel is poised to release and start working on its financial overhaul bill next week, despite a lack of consensus on some key issues.
Senate Banking Chairman Chris Dodd, D-Conn., said Thursday he planned to release a draft bill on Monday, even though a "few outstanding issues remain."
Dodd has been promising to release a draft bill for several weeks, but delayed it while trying to work with key Republicans on the panel. Regulatory overhaul cannot pass the full Senate without some Republicans on board.
The Dodd announcement may signal that the senator wants to get the process moving, with or without Republican support.
It was not specified by Dodd what the "outstanding issues" are. But one has been a proposed consumer financial protection agency and another has been how much regulatory power to strip away from the Federal Reserve.
WASHINGTON (CNNMoney.com) - Federal Reserve Chairman Ben Bernanke unveiled a blueprint Wednesday for pulling back the trillions of dollars the central bank has provided to prop up the nation's economy.
"These programs, which imposed no cost on the taxpayer, were a critical part of the government's efforts to stabilize the financial system and restart the flow of credit," Bernanke said in prepared testimony for a Capitol Hill hearing that was postponed due to snow. "As financial conditions have improved, the Federal Reserve has substantially phased out these lending programs."
But Bernanke also emphasized that the U.S. economy still needs the support of easy money policies. He said that "at some point" in the future the Fed will "need to tighten financial conditions" by raising short-term interest rates and reversing programs that pumped liquidity into the markets.