dr. bernanke, i apologize to you in advance. the conference committee on the payroll dax cut also begins at 10:00. so i'm going to have to leave before i want to. let me close by saying as we nurture the very fragile economy, we should also take immediate steps to enact a plan to reduce our out-year deficits and debt. we should do it in a stable, predictable and balanced way. the question is not whether we should do that. the question is how we do that, and i believe that bipartisan commission simpson-bowles provide the overall framework to the approach for doing that, if not every specific recommendation they make. so with that, dr. bernanke, again, thank you and your colleagues for your work. mr. chairman, thank you. >> thank you. chairman bernanke, the floor is yours. >> thank you. >> chir man ryan, ranking member van hollen and other members of the committee, i appreciate this opportunity to discuss my views on economic outlook, monetary policy and the challenges facing federal fiscal policymakers. over the past 2 1/2 years,

dr. bernanke, chairman bernanke, thank you for appearing before the committee. i represent a part of upstate new york that hosts the third fastest growing high-tech jobs hub in the country, and we have a higher share of our workforce in green collar jobs than anywhere else in america and the innovation economy in our region isn't just a talking point. it's a reality paying bills for many, many families. came about with a huge bit of planning and the investment from both public and private sectors in providing the industrial clustering that's currently under way. so i'm interested in your comments about the investments that need to be part of the response to a troubled economy, that encourage investments in a & & -- r & d, an ideas economy and also the requirement of sound public infrastructure. after 20 years of investment through work in the policy development in the state assembly and when i was at, served in the development authority, we saw what happened when people prodded altogether and now enabled us to experience this comeback. interestingly when i arriv

dr. bernanke, thank you for your testimony. you laid out what i think is a very clear two-track strategy for dealing with economic growth as we move forward. the first is recognizing the fiscal and budget tear challenge that we've got, and i think there's agreement on this committee that we need to come up with a predictable stable way to reduce our deficits and debt. we've had disagreements over how we do it, but not whether we do it. and in looking at that, there are two lessons i think from what we see happening in europe, one is the debt crisis. if you wait too long to address these issues, you're right. your borrowing cost also go up. people will lose faith. we should heed that as an early warning and not delay putting in place those predictable changes. but your testimony also pointed out that there's a danger in overreacting to that in the near term in terms of the negative impact it could have on economic growth. and the other strategy that you've laid out is the need to nurture this very fragile economy we're in right

dr. bernanke, i appreciate your time today. i remember our discussions last year. one thing i asked my staff in the last few days is to read through transpocripted of the committee meetings and looking at those comments and the transcripts, is it fair to say the fed did not see the severity of the housing crisis coming in 2006? >> i think the mistake was a little different than that. house prices were already falling in 2006. and we were aware of that. what we didn't know was what was the impact going to be? and in particular, we didn't have the sufficient understanding of how the fall in house prices, resulting effects on mortgage quality and so on would affect the financial system. that was the linkage that we get to see in 2006. so, yes. we didn't -- obviously, we didn't see the crisis coming. we certainly were aware that the housing market was cooling. and we talked about that quite frequently. i talk about it in testimony. i have to emphasize that, you know, we learned a lot of less so sons from that experience and radically changed the way we do our supervisi

dr. bernanke. a suggestion was made earlier that you make policy pronouncements on housing, and i'm very deeply, as you know, involved in trying to restructure housing finance and the housing market. as much as i personally wish that were true and that you would weigh in on the side of the proposals that i have made and versus others, you and the fed have been, i think, judicious in not doing that, but what you have opined on and i would like to be ask to you say in your own words is the importance of housing, the housing market and a housing recovery if we wish to have a robust economic recovery and job growth. would you care to comment on -- >> oh, i certainly would, and this is the reason that we have a housing committee, basically, at the fed, which a bnch unch o staff and governors looking at this all the time. i would say that one of the main reasons that the recovery has been as disappointing as it has been is that usually housing provides an important amount of the impetus to growth. not ju

dr. bernanke.s you point out, nose two goals are totally consistent, sometimes they get muddled in the message and i understand that sometimes people hear that, interpret the need to prevent doing harm to the fragile economy now as meaning we shouldn't move ahead on long-term debt reduction. of course you can, as you said, you can do things at the same time, but if you undermine the fragile economy, as the imf, as you indicated, has warned is being done with certain fiscal policies in europe, that just creates an even bigger hole, and as i, again, apologize, i believe to go believe -- i have to leave to go to the -- failure to extend the payroll tax cut and whether failure to extend unemployment compensation for millions of americans who are out of work through no fault of their own, failure to do that would be a drag on what is already very fragile economic growth. >> congressman, i know you appreciate that i don't endorse individual tax and spending policies. i think that's a good approach pore m

dr. bernanke, the economy is creating jobs. we've had 22 months of private sector job growth. the unemployment rate is at its lowest level for three years. and it's very noticeable at home in florida. you know, in 2007 and 2008, the headlines in the newspapers were devastating about companies can closing and people losing jobs, and it's noticeably different. it was noticeably different last year with stories about companies hiring. it's pretty steady right now. but obviously, we can do better. and i mean, you have said in your testimony you said a more robust recovery will lead to lower deficits and debts in coming years. so here's the frustration and our colleague who gave us the list of ways to reduce the debt and deficit, it was very noticeable that he did not include job creation in that list. it was cut spending. we're doing that in the budget control act. beat did that. we need to do more. entitlements, there's common ground we could find there. he left off that very important list job creation. and dr. elmendorf from the cb op testified yed that yes if we'd had a lower

dr. bernanke. we must use all the tools at our disposal to help people go back to work. i commend you and your colleagues of using various forms of monetary policy to promote stable prices and higher levels of employment. i do find it troubling at a time when millions of americans are still out of work, many of our republican colleagues want to strip the federal reserve of that mandate that focuses on full employment and putting americans back to work. obviously, the federal reserve must not waver in its commitment to price stability but to deprive you of the tools necessary to boost employment would be a big mistake. without those tools, the economy today would be in much worse shape. as you testified previously before this committee, the measures taken by the federal reserve, the politically unpopular but not economically necessary tarp legislation engineered by the bush and administration and the recovery act by the obama administration averted an extraordinarily severe downturn, perhaps a great depression. indeed, we have averted a great depression. it is important t

dr. bernanke, i want to drill down on something you talked about in general which is europe and i want to go into detail about the central bank liquidity or the dollar-swap agreements. since you have been here last time, it has grown from the agreements with various central banks from $2.8 billion to much more. where does that money come from? is that in existing reserves? where does that $103 billion come from? >> it becomes a liability and an asset on the federal reserve balance sheet. it is paid for by greater access reserves in the banking system and on the other side, we have an asset which is the money given keeps in exchange to a european central bank. >> that would be, in layman's terms, new money, not money you took out of a maturing treasury and moved to a swap agreement, this is money set aside. >> we chose to do it that way because monetary policy currently has grades very close to zero but it will not be difficult to sterilize that to a number of different methods. >> fair enough, you stated earlier it is your current intention with all maturing securities to invest those. as

dr. bernan bernanke, a bunch of different folks. and to run through the quick history in your forecast of last year, y'all expected inflation, talking about the cpi now for urban workers, pick any measure you want but use them across this same analysis. you thought it would be 1.3%. in august you adjusted that up to assumption of 2.8%. finished the year at 3.3%. at the same time that we saw actual rates of inflation that were higher than your estimates you didn't change the assumptions for 2012, roughly the same, 1.3% last january, 1.3% again in august and 1.4% for yesterday. that grabbed my attention and led me to the next slide, which i want to ask you about, which is that we took a look at your projections for cpiu for the next five-year window. the first five-year window and second five-year window. slightly different off by a year because they're a rolling number but let's call the first year the five-year window. you have, despite the fact that inflation turned out to be considerably higher last year than you expected, you act

dr. bernanke for visiting with us today. this economic recovery has been long delayed. it remains the agile. my constituents are frustrated. we are not doing some things here on the fiscal side of the ledger to get the economy moving. the real gdp growth was 1.7%. private sector forecasts indicate in the coming year we are going to be at two 0.2%. that is below the 3% growth trends in history. we have a jobs deficit, 8.6 million jobs lost in the recession. less than a third of those recovered. i am concerned about our country but in back into recession at this point, -- country dipping back into recession at this point. in your interaction with officials, i would like to hear from you, what preparation our fed has made for a disorderly default by greece or some of these other countries. i have not heard any specifics. you have indicated the fed was prepared to use all the different leaguers you had. that is the general question. i would also like you to speak to the money market mutual fund market. investment income would not of -- cover operating expenses. there was an

dr. bernanke. we must use all the tools at our disposal to help people go back to work. commend you and your colleagues of using various forms of monetary policy to promote stable prices and higher levels of employment. i do find it troubling at a time when millions of americans are still out of work, many of our republican colleagues want to strip the federal reserve of that mandate that focuses on full employment and putting americans back to work. obviously, the federal reserve must not waver in its commitment to price stability but to deprive you of the tools necessary to boost employment would be a big mistake. without those tools, the economy today would be in much worse shape. as you testified previously before this committee, the measures taken by the federal reserve, the politically unpopular but not economically necessary tarp legislation engineered by the bush and administration and the recovery act by the obama administration averted an extraordinarily severe downturn, perhaps a great depression. indeed, we have averted a great depression. it is important to

dr. paul? >> thank you, mr. chairman. mr. bernanke you tell me whether or not you do your own shopping at the grocery store? >> yes, i do. >> so you're aware of the prices. this argument that the prices are going up 2%, nobody believes it. the old cpi says prices are going up. people on fixed income are really hurting. the middle class is really hurting because their inflation rate is very much higher than the government tries to tell them. that's why they lose trust in government. but, you know, this whole idea about prices and debasement of currency, if you loan me $100 and two years from now i gave you 90 back, you'd be pretty upset. but we hand that money back that's worth 10% or 15% or 20% less and the fact that nobody's able to do anything about it is upsetting. but if i don't give you your full $100 back, i'm steal 10g from you. so somebody's stealing wealth and it's very upsetting. in january at one of your press conferences, you said that you sort of poked a little bit of fun at people to downplay the 2% inflation rate. but i