February 26, 2013
Washington, D.C. – U.S. Senator Mike Crapo (R-ID), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing at which Federal Reserve Chairman Ben Bernanke delivered his semiannual testimony on monetary policy:
"Thank you, Mr. Chairman. Today, we will hear Federal Reserve Chairman Bernanke testify on the Fed’s monetary policy and the state of the economy.
"Thank you for your ongoing initiatives to improve the transparency Federal Open Market Committee (FOMC). Because so much is at stake for the U.S. economy, the Fed has the responsibility to make as much information available to the American people as possible on its actions.
"I also thank Chairman Bernanke for steadfastly reminding us that one of the most important risks to our economy is our fiscal situation. I completely agree with him.
"That is why I have consistently said that fiscal reform and economic growth should top the list of our priorities this Congress.
"We need to address the federal spending problem, reform our badly broken tax system and promote a sustainable economic recovery that will result in increased jobs.
"Unfortunately, with the Fiscal Cliff deal completed, some officials are looking for an easy way out by claiming that our fiscal problems are nearly solved. Nothing could be further from the truth.
"Our economy contracted in the last quarter. Our unemployment rate remains much too high. Medicare will be insolvent in just over 10 years, and Social Security will be insolvent within a generation, absent structural reforms.
"Until we take specific steps to reform our entitlements and make them solvent for generations to come, and reform our tax code to produce significant, sustained economic growth, our fiscal problems are far from solved.
"In addition to our own fiscal situation, the ongoing fiscal and banking crisis in Europe also presents substantial risks to our economy.
"In response to unsustainable fiscal policies here and abroad, central bankers throughout the world have turned to unconventional monetary policies over the past few years.
"Near-zero interest rates, large-scale asset purchases and record-size central bank balance sheets have become the norm.
"However, some authorities have become concerned that costs of prolonged easy-money policies outweigh the benefits.
"In its annual report released last June, the Bank of International Settlements laid out the risks entailed with the worldwide expansion of central bank balance sheets and their extended low interest rate policies.
"Not only did the report conclude that such actions “may delay the return to a self-sustaining recovery,” but they create “longer-term risks to [central banks’] credibility and operational independence.”
"More recently, the minutes of the Federal Open Market Committee’s (FOMC) January meeting show that several FOMC members expressed concern that the Fed’s prolonged easy-money policies could result in excessive risk-taking and threaten the financial stability of the United States.
"These concerns warrant serious consideration, given the scale, scope and duration of the Fed’s unconventional monetary policies.
"The Fed has kept the target range for the federal funds rate at 0 to 1/4 percent for more than four years.
"The Fed has engaged in multiple rounds of asset purchases, commonly referred to as 'quantitative easing.'
"The Fed is currently buying $40 billion of agency mortgage-backed securities per month and $45 billion of longer-term Treasury securities per month, for a total monthly pace of $85 billion or an annualized pace of more than $1 trillion.
"And, primarily as a result of its large-scale asset purchases, the Fed has ballooned its balance sheet to more than $3 trillion and it is still growing.
"I look forward to hearing from Chairman Bernanke about the concerns raised about the risks of the Fed’s prolonged easy-money policies and why they cannot overcome bad fiscal policy.
"I also look forward to hearing from Chairman Bernanke about how the uncertainty surrounding Dodd-Frank implementation is hampering our recovery. In particular, what specific legislative fixes can be done to remove this uncertainty?
"At our last Humphrey-Hawkins Hearing, Chairman Bernanke confirmed that regardless of Congressional intent, the banking regulators view the plain language of the statute as requiring them to impose some kind of margin requirement on non-financial end-uses of derivatives unless Congress changes the statute.
"Chairman Bernanke also confirmed that the Fed is comfortable with an explicit statutory exemption.
"I look forward to hearing Chairman Bernanke’s suggestions for other legislative fixes to Dodd-Frank that could garner bipartisan support.
"Thank you, Mr. Chairman."