ben s bernanke : federal reserve ’ s exit strategy testimony by mr ben s bernanke, chairman of the board of governors of the federal reserve system, before the committee on financial services, us house of representatives, washington dc, 10 february 2010. statement as prepared for delivery. the hearing was postponed due to inclement weather. * * * chairmen frank and watt, ranking members bachus and paul, and other members of the committee and subcommittee, i appreciate the opportunity to discuss the federal reserve ’ s strategy for exiting from the extraordinary lending and monetary policies that it implemented to combat the financial crisis and support economic activity. broadly speaking, the federal reserve ’ s response to the crisis and the recession can be divided into two parts. first, our financial system during the past 2 – 1 / 2 years has experienced periods of intense panic and dysfunction, during which private short - term funding became difficult or impossible to obtain for many borrowers. the pulling back of private liquidity at times threatened the stability of major financial institutions and markets and severely disrupted normal channels of credit. in its role as liquidity provider of last resort, the federal reserve developed a number of programs to provide well - secured, mostly shortterm credit to the financial system. 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. 1 as financial conditions have improved, the federal reserve has substantially phased out these lending programs. second, after reducing short - term interest rates nearly to zero, the federal open market committee ( fomc ) provided additional monetary policy stimulus through large - scale purchases of treasury and agency securities. these asset purchases, which had the additional effect of substantially increasing the reserves that depository institutions hold with the federal reserve banks, have helped lower interest rates and spreads in the mortgage market and other key credit markets, thereby promoting economic growth. although at present the u. s. economy continues to require the support of highly accommodative monetary policies, at some point the federal reserve will need to tighten financial conditions by raising short - term interest rates and reducing the quantity of bank reserves outstanding. we have spent considerable effort in developing the tools we will need to remove policy accommodation, and we are fully confident that at the appropriate time we will be able to do so effectively. liquidity programs with the onset of the crisis in the late summer and fall of 2007, the federal reserve aimed to

ben s bernanke : semiannual monetary policy report to the congress testimony by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, before the committee on banking, housing and urban affairs, us senate, washington, dc, 24 february 2009. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve systema€™s website. * * * chairman dodd, senator shelby, and members of the committee, i appreciate the opportunity to discuss monetary policy and the economic situation and to present the federal reserve's monetary policy report to the congress. recent economic and financial developments and the policy responses as you are aware, the u. s. economy is undergoing a severe contraction. employment has fallen steeply since last autumn, and the unemployment rate has moved up to 7. 6 percent. the deteriorating job market, considerable losses of equity and housing wealth, and tight lending conditions have weighed down consumer sentiment and spending. in addition, businesses have cut back capital outlays in response to the softening outlook for sales as well as the difficulty of obtaining credit. in contrast to the first half of last year, when robust foreign demand for u. s. goods and services provided some offset to weakness in domestic spending, exports slumped in the second half as our major trading partners fell into recession and some measures of global growth turned negative for the first time in more than 25 years. in all, u. s. real gross domestic product ( gdp ) declined slightly in the third quarter of 2008, and that decline steepened considerably in the fourth quarter. the sharp contraction in economic activity appears to have continued into the first quarter of 2009. the substantial declines in the prices of energy and other commodities last year and the growing margin of economic slack have contributed to a substantial lessening of inflation pressures. indeed, overall consumer price inflation measured on a 12 - month basis was close to zero last month. core inflation, which excludes the direct effects of food and energy prices, also has declined significantly. the principal cause of the economic slowdown was the collapse of the global credit boom and the ensuing financial crisis, which has affected asset values, credit conditions, and consumer and business confidence around the world. the immediate trigger of the crisis was the end of housing booms in the united states and other countries and the associated problems in mortgage markets, notably the collapse of the u. s. subprime mortgage market. conditions