Bernanke: Don't tamper with the Fed
Renominated chairman writes commentary warning Congress not to limit the central bank's independence.
NEW YORK (CNNMoney.com) -- Federal Reserve Chairman Ben Bernanke, just days ahead of his confirmation hearing, is warning Congress that actions limiting the central bank's independence could prove detrimental to the causes of financial reform and economic recovery.
In an op-ed piece to be published in Sunday's Washington Post, Bernanke criticizes two moves aimed at limiting the Fed -- a proposal in the Senate to strip the central bank of its bank regulatory powers and a House Financial Services Committee vote to audit monetary policy deliberations and actions.
"These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States," Bernanke wrote.
Bernanke says the congressional moves are a byproduct of the public frustration over the financial crisis and the government's response, especially the bailout of large banks. (Fed rage boils on Capitol Hill)
"The government's actions to avoid financial collapse last fall -- as distasteful and unfair as some undoubtedly were -- were unfortunately necessary to prevent a global economic catastrophe that could have rivaled the Great Depression in length and severity, with profound consequences for our economy and society," he wrote.
But the Fed chairman says that, while reforms are needed, "we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation."
Among the ideas he supports is development of a special bankruptcy procedure for firms "whose disorderly failure would threaten the integrity of the financial system -- to ensure that ad hoc interventions of the type we were forced to use last fall never happen again."
Bernanke's column comes ahead of a Senate Banking Committee hearing, scheduled for Thursday, considering his nomination for a second term as Fed chairman. President Obama announced the nomination in August.
The last sentence of his commentary is likely to be the theme he and his supporters will stress during the hearing.
"Now more than ever, America needs a strong, nonpolitical and independent central bank with the tools to promote financial stability and to help steer our economy to recovery without inflation," Bernanke wrote.