US Federal Reserve chairman Ben Bernanke last night admitted 'mistakes' leading up to the economic crisis but argued the central bank's independence should not be limited in financial system reforms.
Bernanke defended his record at a stormy Senate Banking Committee hearing on his confirmation for a second term as chairman, and stressed the need for reforms to avert future crises without compromising the Fed's independence on monetary policy.
'There were mistakes made all around,' Bernanke said when asked if he would change what the Fed had done ahead of the near-meltdown of the financial system.
On bank regulation, he said: 'We should have done more. We should have required more capital, more liquidity. We should have required tougher risk management controls.'
The Fed chief argued that the extraordinary efforts, including controversial bailouts, helped avert an even bigger catastrophe.
Without some of these actions, there could have been 'a meltdown of many of the major banks in the world' and 'we could very well be in a depression-like situation with much higher unemployment than today,' Bernanke said.
'It's extraordinarily important to understand that I did not intervene because I care about Wall Street. I am not a Wall Street person, I'm an academic,' he stated.
Bernanke's hearing opened after a lawmaker used a Senate prerogative to place a hold on the nomination, which could delay his confirmation, and other lawmakers offered blunt criticism of the powerful Fed chief.
'I did not anticipate a crisis of this magnitude and severity,' Bernanke told the panel. 'But given that it happened, many of the banks were not adequately prepared in terms of their reserves, in terms of their liquidity. That is a mistake we won't make again,' he said.
The Fed chief said the crisis calls for 'strengthening regulation and strengthening supervision' of the financial system. But Bernanke warned about placing too much political oversight on the Fed, particularly on its role in setting monetary policy.
'Monetary policy, by its very nature, has to look ahead over a longer period of time,' he said.
Bernanke faced unusually harsh criticism from some lawmakers frustrated over the deep economic slump and bailouts of big financial firms, but the powerful central bank chief is nonetheless expected to win approval from the Banking Committee and the full Senate.
