Obama: ‘Ben Bernanke Has Performed Very Well’

Next January, Ben Bernanke’s term as chairman of the Federal Reserve Board comes to a close. His reappointment will be in the hands of President Barack Obama, and today Obama gave a hint to his thinking on Bernanke and whether he deserves reappointment. An excerpt from the president’s press conference appears below:

Q: Right here, sir. Switching gears slightly, in light of the financial regulation and reform that you have made, how do you rate the performance of the Fed in handling the financial crisis? And more specifically, how do you rate the performance of Ben Bernanke, and would you like him to stay on when his term ends in January?

THE PRESIDENT: I’m not going to make news about Ben Bernanke — (laughter) — although I think he has done a fine job under very difficult circumstances.

I would say that all financial regulators didn’t do everything that needed to be done to prevent the crisis from happening. And that’s why we’ve put forward the boldest set of reforms in financial regulation in 75 years, because there were too many gaps where there were laws on the books that would have brought about a prevention of the crisis; the enforcement wasn’t there. In some cases, there just weren’t sufficient laws on the books — for example, with the non-banking sector.

I think that the Fed probably performed better than most other regulators prior to the crisis taking place, but I think they’d be the first to acknowledge that in dealing with systemic risk and anticipating systemic risk, they didn’t do everything that needed to be done.

I think since the crisis has occurred, Ben Bernanke has performed very well. And one of the central concepts behind our financial regulatory reform is that there’s got to be somebody who is responsible not just for monitoring the health of individual institutions, but somebody who’s monitoring the systemic risks of the system as a whole. And we believe that the Fed has the most technical expertise and the best track record in terms of doing that.

But that’s not the only part of financial regulation. One of the things that we’re putting a huge amount of emphasis on is the issue of consumer protection — whether it’s subprime loans that were given out because nobody was paying attention to what was being peddled to consumers, whether it’s how credit cards are handled, how annuities are dealt with, what people can expect in terms of understanding their 401(k)s. There’s a whole bunch of financial transactions out there where consumers are not protected the way they should, and that’s why we said we’re going to put forward a consumer financial protection agency whose only job it is to focus on those issues.

Now, the Fed was one of the regulators that had some of those consumer responsibilities. We actually think that they’re better off focusing on issues of broad systemic risk, and we have just one agency that’s focused on the consumer protection side.

Q: But is the Fed getting too powerful?

THE PRESIDENT: If you look at what we’ve proposed, we are not so much expanding the Fed’s power as we are focusing what the Fed needs to do to prevent the kinds of crises that are happening again. Another good example is the issue of resolution authority. I think it wasn’t that long ago where everybody was properly outraged about AIG, and the enormous amounts of money the taxpayers had to put into AIG in order to prevent it from dragging the entire financial system down with it.

Had we had the kinds of resolution authority, the kinds of laws that were in place that would allow a orderly winding down of AIG, then potentially taxpayers could have saved a huge amount of money. We want that power to be available so that taxpayers aren’t on the hook.