Federal Reserve Chairman Ben Bernanke faced stern questioning and criticism before a Senate panel Thursday.
Bernanke, whose nomination to serve a second term at the Fed is subject to Senate approval, sought to stand on his record before members of the Senate Banking Committee, pointing to the Fed's extraordinary actions over the last two years to resolve the nation's financial crisis.
"Over the past two years, our nation, indeed the world, has endured the most severe financial crisis since the Great Depression," he said. "Today, most indicators suggest that financial markets are stabilizing and that the economy is emerging from the recession."
He added, "Yet our task is far from complete. Far too many Americans are without jobs, and unemployment could remain high for some time even if, as we anticipate, moderate economic growth continues."
Bernanke warned the panel that the price of inaction would have been a far worse economic downturn, but he conceded that the Fed needed to review its actions to see what can be done to prevent such crises from occurring in the future.
"We have been actively engaged in identifying and implementing improvements in our regulation and supervision of financial firms," he said. "In the realm of consumer protection, during the past three years, we have comprehensively overhauled regulations aimed at ensuring fair treatment of mortgage borrowers and credit card users, among numerous other initiatives."
He added, "To promote safety and soundness, we continue to work with other domestic and foreign supervisors to require stronger capital, liquidity, and risk management at banking organizations, while also taking steps to ensure that compensation packages do not provide incentives for excessive risk-taking and an undue focus on short-term results."
But Bernanke's words were not enough to reassure the top Republican on the panel, Sen. Richard Shelby of Alabama, who faulted Fed policies for setting the stage for the economic collapse.
"Prior to the recent financial crisis, the Federal Reserve kept interest rates too low for too long, encouraging a housing bubble and excessive risk taking," Shelby said. "In addition, the Fed failed to use its available powers to mitigate those risks."
He added, "In the face of rising home prices and risky mortgage underwriting, the Fed failed to act. The Fed chose not to use its rule-making authority over mortgages to arrest risky lending and underwriting practices."
Shelby also took Bernanke to task for working closely with the Treasury Department, opening the discount window to financial companies over which it has no oversight and vastly expanding its balance sheet, from around $800 billion to more than $2.2 trillion.
"For many years I held the Federal Reserve in very high regard. I had a great deal of respect for not only its critical role in U.S. monetary policy, but also for its role as a prudential regulator," he said. "I believed it to be this nation's repository of financial expertise and excellence."
Shelby added, "I fear now, however, that our trust and confidence were misplaced."
Even Sen. Chris Dodd, D-Conn., the chairman of the committee who supports Bernanke's nomination, said he believes that the role of the Fed needs to be restructured.
"Under your leadership, Mr. Chairman, the Federal Reserve has taken extraordinary actions to right the economy," Dodd said. "These efforts have played a very significant role in arresting the financial crisis and financial markets have begun to recover. For that, Mr. Chairman, you and the Federal Reserve deserve praise for your acumen and gratitude for your role in preventing a far worse outcome that we might have otherwise seen."
He added, "I believe you deserve another term as Chairman of the Federal Reserve."
But Dodd said that by expanding the role of the Fed beyond its core functions, conducting monetary policy, supervising payment systems, and acting as the lender of last resort, the institution had failed to address other issues, such as consumer protection in the areas of mortgage lending and credit cards.
"As Congress takes up financial reform this year, I have proposed creating new entities outside of the Federal Reserve to focus responsibility for bank regulation, consumer protections, and systemic risk, so these important duties will not need to compete for the Federal Reserve's attention," Dodd said.
He added, "What I am proposing does not exclude the Fed from involvement in these issues, but rather expands the participants in these efforts."
For comments and feedback contact: editorial@rttnews.com
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.