WASHINGTON (Reuters) - Below are highlights from the question and answer session of a House Financial Services Committee hearing with Federal Reserve Chairman Ben Bernanke testifying on monetary policy and the U.S. economy.
BERNANKE ON OPPORTUNITIES FOR SAVERS:
"We are certainly paying attention to the effects of low interest rates not only on savers but on other financial institutions. ... From the point of view of savers, for most savers, something less than 10 percent of all savings by retirees is in the form of fixed-interest instruments like CDs. Remember, people also own equities, they own money-market funds, they own mutual funds, they have 401Ks and a variety of things and those assets are assets whose returns depend very much on how strong the economy is. So in trying to strengthen the economy, we are actually helping savers by making the returns higher as we can see in the stock market, for instance."
BERNANKE ON THE FISCAL CLIFF AHEAD:
"Achieving long-run sustainability and providing comfort to the public and the markets that deficits will come under control over a period of time - that's very important for confidence and for creating more support for the recovery. But at the same time, I think you also have to protect the recovery in the near term. Under current law, on January 1, 2013, there's going to be a massive fiscal cliff of large spending cuts and tax increases. I hope that Congress will look at that and figure out ways to achieve the same long-run fiscal improvement without having it all happen at one date."
BERNANKE ON THE CONSEQUENCES OF UNSUSTAINABLE FISCAL POLICY:
"Once the markets lose confidence in the ability of the government to maintain fiscal sustainability then there are numerous risks. The most extreme case would be a financial crisis or a sharp increase in interest rates analogous to what we see in some European countries. Even absent that extreme result, large deficits and debt over a longer period of time raise interest rates above levels where they normally would be and crowd out investment, and are bad for growth and productivity. They also may involve borrowing from foreign lenders which also is a drain on current U.S. income. So it is important to address this issue."
(Washington newsroom)
