Federal Reserve press conference, 2011-11-02 — Chair Ben Bernanke

Question (Steve Liesman, CNBC): Was the letter appropriate?
Answer: Well, I’m not going to comment on that. I—we listen to everybody’s input, and the most important thing is that we are free to make the decision based on the interest of the American people, what’s in the interest of the economy, and that’s what we’re going to do.

Question (Jennifer Liberto, CNN): Chairman, you’ve said in the past you understand some of the anger on display with the Occupy Wall Street protesters. And a lot of the anger is directed at the Fed, with some protesters saying that the Fed is part of the problem, that the Fed preserves the financial system and promotes income inequality. Can—are the protesters right? Is the Fed part of the problem? And, secondarily, can the Fed do anything to promote a more equitable economy?
Answer: Well, as I’ve said before, I certainly understand that many people are dissatisfied with the state of the economy. I’m dissatisfied with the state of the economy. Unemployment is far too high. Inequality, which is not a new phenomenon, has been going on—increases in inequality have been going on for at least 30 years, but obviously as that has continued, we now have a more unequal society than we’ve had in the past. So again, I fully sympathize with the notion that the economy is not performing the way we would like it to be, and in that respect, the concerns that people express across the spectrum are understandable. I think that the concerns about the Fed are based on misconceptions. The Federal Reserve was involved, obviously, in trying to stabilize the financial system in 2008 and 2009. A very simplistic interpretation of that was that we were doing that because we wanted to preserve, you know, bankers’ salaries. That is obviously not the case. What we were doing is trying to protect the financial system in order to prevent a serious collapse of both the financial system and the American economy. We needed to take those steps. If we hadn’t taken them, the consequences would have been dire. And not everybody understands that, and therefore they sometimes misunderstand our motives. Our motives are strictly to do what’s in the interest of the broad public, and I believe that our efforts to stabilize the financial system, which ultimately proved successful, were very much in the interest of the broad public. With respect to the current economy, as I described earlier, we are currently continuing with our accommodative monetary policy. We are trying to do our best to support economic growth and job creation. I think it would be helpful if we could get assistance from some other parts of the government to work with us, to help create more jobs. But certainly, we are doing our part to try to create more jobs and more opportunities in America. With respect to inequality, I think the best way to address inequality is to create jobs. It gives people opportunities. It gives people a chance to earn income, gain experience, and to ultimately earn more. But that’s an indirect approach; that’s really the only way the Fed can address inequality per se.

Question (Pedro Da Costa, Reuters): Pedro DaCosta from Reuters. Mr. Chairman, what is your appetite for a renewed push into large-scale mortgage-backed securities purchases? The Fed had stated the intention to move the structure of its balance sheet more to its original, you know, Treasuries- only composition. But recently, it revived the MBS program through the reinvestments, and folks like Governor Tarullo and William Dudley have raised the possibility of further large-scale asset purchases on the MBS side. Could you comment on your views on that particular proposal?
Answer: Yes, I’ll be glad to. You were absolutely correct—first, that ultimately we would like to return our portfolio to Treasuries only. That may be some time down the road at this point. You’re also correct that as part of our policy action at the last meeting, we began to reinvest mortgage-backed securities and agency debt back into mortgage-backed securities, thereby providing some additional support for the mortgage market. The housing sector is a very important sector. It’s—the problems in that sector are clearly a big reason why our economy is not recovering more quickly. So I do think that purchases of mortgage-backed securities is a viable option. It’s certainly something we would consider if conditions were appropriate. So the answer is yes, we would certainly look at that.

Question (Pedro Da Costa, Reuters): Can I just ask whether you see it as an isolated case or whether this is the start of something broader?
Answer: The question is, Was that an isolated case? It appears to be an idiosyncratic case, and we’re monitoring the possible impacts on funding markets and elsewhere. And, so far, we’ve not seen any significant impact on financial stability.

Question (Robin Harding, Financial Times): Robin Harding from the Financial Times. Mr. Chairman, could you explain the menu of options that the Committee has for improving its communication about when it might raise interest rates and what the conditions are in which it might do that? For example, might it makes sense for the Fed to publish a forecast of its own future interest rates, and what’s the advantages and disadvantages of that? Thank you.
Answer: Well, again, as I noted in my opening remarks, no decisions have been made, so I want to be very clear that no final—you know, there is no final outcome here in this discussion. But clearly, there’s a range of things that we can do. We can provide more information about our objectives, for example. We could provide information about where we want inflation to be in the long term, for example. We can also provide information about the future path of interest rates, which we’ve done to some extent via our “mid-2013” language in the statement. An alternative approach, which Charlie Evans and others have suggested, is to tie that to economic conditions and to provide more information about under what circumstances we would raise rates. That is certainly something that we have discussed and I think is an interesting alternative. There’s a lot of interest in using the survey of economic projections in constructive ways as we have up until now to provide information to the public about our plans. And in particular, using the SEP as a way of giving information about our future policy decisions is something that’s on the table. There’s no decision made about that, but that’s one direction that we might find productive.