Bernanke Reflects On His Way Out

(RTTNews) - In what may be his last public appearance as the world's most important central banker, outgoing Federal Reserve Ben Bernanke reflected on emergency measures taken during the 2007-2008 banking sector meltdown and offered a full-throated defense of the Fed's more recent bond-buying program.

"It's like, if you're in a car wreck, you're mostly involved in trying not to go off the bridge. And later on, you're like, 'Oh, my god,'" he said of the financial crisis.

At that time, the Fed and other central banks provided the largest liquidity injection into the credit market in world history to stabilize the financial system.

"So, we did the right thing, I hope, we tried to do the right thing. And there certainly has been pushback. We hope that as the economy improves and as we tell our story and as more information comes out about why we did what we did … that people will appreciate and understand that what we did was necessary, that it was in the interest of the broader public, that it was a Main Street set of actions aimed at helping the average American."

One of the more difficult aspects of his job was explaining the Fed's response to a nervous and skeptical U.S. population.

"I tried where I could to bring the story not just to markets and other economists but to a more Main Street audience," Bernanke said. "It was very challenging, frankly, to do that."

Steps taken during his tenure to provide clarity to markets, such as "forward guidance" on interest rates, have been positive, he added.

He also defended the Fed's unprecedented actions to keep the economic recovery going.

Over the past two years the Fed has ballooned its balance sheet to $4 trillion in an effort to keep rates exceedingly low.

"The problem with QE is it works in practice but it doesn't work in theory," Bernanke quipped, referring to the Fed's current $75 billion per month bond-buying program. "I think of QE being a basic monetarist principle."

"It was at least somewhat effective, and given that we were at the limits of what conventional monetary policy could do, we felt that we needed to take additional steps," he said.

The Fed remains vigilant against risks to financial stability presented by QE, Bernanke said. Regarding price stability, he noted that inflationary pressures have not emerged as many critics of the Fed's plan were predicting.