Bernanke hopes U.S. not relegated to slow recovery

PRINCETON, New Jersey (Reuters) - Federal Reserve Chairman Ben Bernanke said on Friday it was unclear whether the U.S. economy would be relegated to the type of slow recovery that typically follows a financial crisis.

Acknowledging the economy was growing less than the U.S. central bank would like, Bernanke noted that recoveries following financial crises historically have been more sluggish than rebounds from normal recessions.

However, he said it was not clear if that was because of the unusual economic headwinds financial crises create or because past policy responses have not been aggressive enough, saying he hoped the current U.S. recovery escapes that fate.

"It could be that financial crises lead to slow recoveries because of the headwinds created by deleveraging, by bad assets, by problems in the banking system and the like and I'm sure there's some of that" in the current U.S. episode, he told a group of scholars at Princeton University.

"But it could also be that in some episodes in the past ... maybe governments and policymakers weren't aggressive enough in fixing their financial systems and using monetary and fiscal policy appropriately," he said in answer to a question.

"Certainly the Federal Reserve has been quite aggressive ... so we're hopeful to get a better result."

Bernanke offered no guidepost to the U.S. central bank's next step, and steered clear of offering his thoughts on the economic outlook.

The Fed said on Tuesday it was prepared to take action to help the recovery and lift inflation. Many analysts expect it to resume buying longer-term government debt later in the year to drive borrowing costs down further.

In his prepared remarks to the group, Bernanke acknowledged the economics profession has a lot to answer for after the financial crisis of 2007-2009, including why economists have been unable so far to engineer a healthy recovery.

"Although financial markets are for the most part functioning normally now, a concerted policy effort has so far not produced an economic recovery of sufficient vigor to significantly reduce the high level of unemployment," he said.

However, Bernanke defended the field of economics.

He said the recent crisis reflected a failure to regulate financial institutions, manage risks and anticipate shocks rather than shortcomings in economic theory.

He urged economists to learn more about human behavior, especially under uncertain circumstances, and to learn more about how asset bubbles form and how the ability of financial firms to sell assets can come to a screeching halt in a crisis.

(Reporting by Kristina Cooke in Princeton and Mark Felsenthal in Washington; writing by Mark Felsenthal; Editing by Andrew Hay)