Federal Reserve chair Ben Bernanke is firmly resisting the initiative in Congress to subject the nation's bank to a public audit. And he's reiterating his view that even though the economy will grow more quickly this year than last, we won't soon see a significant drop in unemployment.
"Central banks that are independent in their decision-making provide a much better outcome than a central bank whose decisions are dictated by short-term political considerations," Bernanke said this afternoon during a rare question and answer session after a speech at the National Press Club in Washington D.C. "This is a fundamental bedrock principal of central banking."
Bernanke said that those in Congress issuing calls to "audit the Fed"—a group that includes both Rep. Ron Paul, a conservative Republican from Texas who now chairs the congressional committee that oversees the Fed and Sen. Bernie Sanders, a self-described socialist from Vermont—don't want to stop at simply reviewing the Fed's transactions, which are already made public. Rather, he said, they want data that would enable "an evaluation to Congress of whether or not the Fed was making the right monetary policy decisions."
That, Bernanke said, could lead to the Fed becoming "essentially an arm of Congress in making monetary policy decisions," something he said he views as "a very bad outcome."
Last week, Paul and his son, Sen. Rand Paul, a Kentucky Republican, reintroduced "Audit the Fed" legislation. "We must take a critical look at the Fed's monetary policy decisions, discount window operations, and a host of other things, with a real audit -- and not just pay lip-service to the idea of an audit," Rand Paul said.
In his prepared remarks, Bernanke pointed to recent positive economic news, including increased consumer spending and today's report of a decline in new jobless claims. But, he said, "with output growth likely to be moderate for a while and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level."
Fed officials have previously said they expect unemployment, currently at 9.4 percent, to remain around 9 percent at the end of 2011, and around 8 percent a year later.
During the question and answer session, Bernanke brought up the problem of long-term unemployment, noting that around 45 percent of all the unemployed have been jobless for 6 months or more. That's especially harmful, he said, because the longer someone is out of work, the more their value as a worker declines. "They lose their skills, they lose their connections, they lose their knowledge of what's happened in their line of work," he said. "So the consequences could last a while."
Bernanke said that despite a recent increase in commodity prices, overall inflation remains "quite low."
Because of high unemployment and low inflation, Bernanke said the economy still required support from the Fed. The central bank voted unanimously last month to continue its $600 billion asset-buying program, some conservatives have assailed by claiming it could lead to renewed inflation.
Asked whether the Fed would break with past practice and hold regular press conferences, Bernanke responded with caution. He said a committee was considering the issue and would make a decision shortly, but added: "We don't want to create unnecessary volatility in financial markets by saying things that may be misinterpreted if they're too ad hoc."
The country's top banker also weighed in on more pressing matters: He described himself as neutral on the issue of Sunday's Super Bowl, but noted that "one of the teams has a quarterback named Ben"—a reference to Pittsburgh Steelers star Ben Roethlisberger.
But Bernanke suggested the game won't do much for the economy. "GDP will drop to nothing during that three-hour span," he joked.