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Congresswoman Waters Responds to Federal Reserve Chairman Bernanke's Testimony on Challenges to Economy

July 20, 2009
Press Release

As required by the Humphrey-Hawkins legislation, the Federal Reserve must transmit a Monetary Policy Report to the Congress twice a year outlining its monetary policy and reporting on the state of the economy. Fed Chairman Ben Bernanke testified today before the House Financial Services Committee regarding the report, and Congresswoman Maxine Waters (D-CA), a senior member of the Committee and chairwoman of the Subcommittee on Housing and Community Opportunity, issued the following statement.

"Chairman Bernanke delivered clear and straightforward testimony to the Committee, and was responsive in his answers to Members' questions.  I appreciated this because the economy is clearly going through a difficult period, and it is no time for our leading monetary policymaker to be opaque or evasive in his appearances before Congress."

"Chairman Bernanke acknowledged the challenges facing the economy, particularly the contraction in the housing market and the spillover effect of tightening overall credit conditions.  This obstacle to economic growth has been compounded by rapid increases in the cost of gasoline and other commodities, which create inflationary pressures even as they sap consumer purchasing power.  The overall impacts include a decline in the labor market of 94,000 jobs per month through June, an increase in unemployment to 5.5% and continued weakness in the housing market.  However, the Board's Members and Reserve Bank presidents conclude from relatively strong consumer and business spending data that, while output would expand slowly for the remainder of 2008, economic growth will pick up gradually over the next two years."

"The Federal Reserve has taken major steps in the past six months to prevent large disruptions in the financial markets. The Chairman explained clearly how the Fed provided liquidity in the credit markets by easing the terms for bank borrowing at the discount window and increasing the amount of credit banks could access through the Term Auction Facility.  He also made a strong case for the Fed's emergency intervention in the Bear Stearns collapse and to work with the Treasury Department to lay out a plan to ensure the stability of the GSEs, Fannie Mae and Freddie Mac.  Congress will be examining the latter issue in the coming days."

"Finally, I want to commend Chairman Bernanke for the Fed's recent actions on behalf of consumers.  Unfortunately, the subprime lending crisis resulted in significant part from federal regulators' failure to intervene—most prominently a Federal Reserve that declined to act on its own authority in the area, which was established in 1994.  It is heartening that Chairman Bernanke is changing this troubling pattern, by issuing new rules relating to subprime lending and credit card disclosures.  I would have preferred some to have gone further, such as outright bans on prepayment penalties for mortgage loans, but this is a promising start."