Kansas City made history on Sunday. Or, rather, a chairman of the Federal Reserve made history in Kansas City on Sunday.
Federal Reserve Chairman Ben Bernanke answered questions from Kansas City area residents in a town hall audience, the first time a chairman of the Federal Reserve took questions from citizens in a forum. Those at the town hall meeting at the Federal Reserve Bank of Kansas City in downtown Kansas City came by invitation only.
Bernanke asserted he was not going to be the Federal Reserve chairman who presided over the second Great Depression. That, he said, justified the numerous bailouts that he said kept the country’s economy afloat. Still, Bernanke expects more pain prior to recovery. He expects the unemployment rate to top 10 percent before the economy begins to grow again by year’s end.
PBS Anchor Jim Lehrer hosted the event which will be broadcast in three 20-minute segments starting tonight on the "NewsHour with Jim Lehrer". The Kansas City public television station KCPT will broadcast the entire forum at 7:30pm Friday.
Bernanke admitted that the Fed was slow to recognize the effect the subprime mortgage mess was having on the economy. On the bailouts, Bernanke said his academic specialty in studying the Great Depression helped guide actions. He told the audience the Federal Reserve failed to act in the 1930s, triggering the country’s greatest economic crisis. Under Bernanke’s guidance, the Fed cut interest rates to nearly zero, created new programs and bailed out insurance giant American International Group and Bear Stearns. He said it would have acted to save Lehman Brothers, but didn’t have the tools necessary to do so. Bernanke insisted the bail outs prevented failures that would have triggered an incredible economic downturn that would have hurt all Americans.
Bernanke said the Fed must be careful not to over stimulate the economy. He predicted the Fed would gradually pull back on its effort to keep from triggering inflation. Bernanke’s term as chairman of the Federal Reserve ends at the end of January. President Obama will decide whether to appoint him to an additional term.