"The market's recent extreme volatility resulting from the offhanded comments of one individual, our witness today, is not healthy for an economy," Hensarling said in his opening statement during the Fed chairman’s semiannual Monetary Policy Report on the state of the nation's economy.
Hensarling also accused the Fed chairman of being an enabler of President Obama’s failed fiscal policies. "The Federal Reserve has regrettably, in many ways, enabled this failed economic policy through a program of risky and unprecedented asset purchases and has swollen its balance sheet to more than $3 trillion."
Ranking Member Maxine Waters (D-Calif.) asked Bernanke if he agreed that the
Bernanke replied that the short-term policies have likely lowered growth of the Gross Domestic Product (GDP) by one or two percentage points, but blamed congressional inaction for the economy’s long-term problems.
"Congress has not addressed a lot of long-run issues where sustainability remains not yet achieved," he said. "My suggestion to Congress is to consider possibilities that involve somewhat less restraint in the near term and more action to make sure that we are on a sustainable path in the long run."
Bernanke pointed out that the housing market continues to recover, but admitted that the jobs market is still stagnant. "Despite these gains, the jobs situation is far from satisfactory, as the unemployment rate remains well above its longer-run normal level, and rates of underemployment and long-term unemployment are still much too high."
He also warned that “with the recovery still proceeding at only a moderate pace, the economy remains vulnerable to unanticipated shocks, including the possibility that global economic growth may be slower than currently anticipated."
"The risks remain that tight federal fiscal policy will restrain economic growth over the next few quarters by more than we currently expect, or that the debate concerning other fiscal policy issues, such as the status of the debt ceiling, will evolve in a way that could hamper the recovery," the Fed chairman said in his prepared remarks. (See Bernanke statement.pdf)
On inflation, Bernanke said it remains low, but is something the Fed will continue to monitor.
“The (Fed) is certainly aware that very low inflation poses risks to economic performance – for example by raising the real cost of capital investment—and increases the risk of outright deflation. Consequently, we will monitor this situation closely as well, and we will act as needed to ensure that inflation moves back toward our 2 percent objective over time.”
Rep. Bill Huizenga (R-Mich.) began his questioning by asking Bernanke a question he said was given to him by a friend: "Should I refinance my mortgage now?"
Bernanke jokingly responded: "I'm not a qualified financial advisor."
"That may be part of the problem with Dodd-Frank (Wall Street Reform and Consumer Protection Act). If you don't qualify, then nobody qualifies," Huizenga retorted.
Huizenga, who dubbed the Fed's monetary policy "dovish," said that the government has looked "for far too long" to itself to solve the country's continuing financial ills. He also expressed concern that Wall Street has become too dependent on the Federal Reserve.
"With our GDP stagnating and unemployment remaining at 7 and a half percent or more since President Obama has taken office in 2009, you don't see very many economists predicting the economy to take off in the near future," he noted.