Bernanke defends Federal Reserve’s efforts to stimulate economy

WASHINGTON — Federal Reserve Chairman Ben S. Bernanke defended the central bank’s efforts to stimulate the economy, even as Republican presidential candidate Mitt Romney criticized those steps and said that, if elected, he wouldn’t reappoint Bernanke to the post.

Bernanke defended the Fed’s efforts in a letter to Rep. Darrell Issa (R-Vista) released Friday. The Fed is considering another round of bond-buying to boost the sluggish recovery.

“There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery,” Bernanke said in the letter to Issa, chairman of the House Committee on Oversight and Government Reform.

Earlier this month, Issa sent Bernanke 10 pages of detailed questions about the Fed’s actions.

In a seven-page response, Bernanke reiterated the Fed’s recent statement that it would closely monitor the economy and take action if necessary. And Bernanke said the steps taken by the Fed, which has dramatically expanded its balance sheet since the financial crisis, were necessary to help the economy.

“The monetary accommodation provided by the Federal Reserve has substantially helped the U.S. economy by easing financial conditions relative to the conditions that would have prevailed otherwise,” Bernanke wrote.

Romney said this week that he’s not a fan of the Fed’s efforts under Bernanke, adding that another round of stimulative bond-buying was “the wrong way to go.”

And after a top economic advisor to Romney’s campaign said this week that Bernanke has done a good job and should be considered for another term, Romney reiterated that this was not his view.

“I would want to select someone who was ... a new person to that chairman’s position, someone who shared my economic views, that I thought was sympathetic to the needs of our nation,” Romney told Fox Business on Thursday.

Bernanke is a registered Republican who was first appointed Fed chairman in 2006 by Republican President George W. Bush. In 2010, President Obama reappointed Bernanke to a second four-year term as chairman despite some strong opposition from both political parties.

Other Republicans have been angered by the Fed’s unprecedented steps under Bernanke to deal with the financial crisis and deep recession. Rep. Ron Paul (R-Texas), who battled Romney for the Republican presidential nomination, built his campaign around dismantling the Federal Reserve.

Romney hasn’t gone that far, but he clearly has not been a fan of Bernanke.

It was surprising, then, when Glenn Hubbard, a former top economic aide to Bush who is now advising Romney, praised Bernanke and said he “should get every consideration” for another term.

“You have to give Ben Bernanke and the Fed high marks for much of their actions,” Hubbard told Reuters TV.

As for a replacement for Bernanke, Romney said he would consider Hubbard, as well as another of his top economic advisors, Greg Mankiw. Both are respected economists who have been mentioned as possible Fed chairmen.

But Romney said it’s too soon to think about that. “I haven’t considered a single person at this point,” he said.

jim.puzzanghera@latimes.com