Bernanke questioned on Capitol Hill
Federal Reserve Board Chairman Ben Bernanke prepares for the beginning of a hearing before the House Financial Services Committee July 13, 2011 on Capitol Hill in Washington, D.C.
Kai Ryssdal: Mr. Bernanke was the guest of the Financial Services Committee this morning. With more than 50 members, it's one of the biggest committees in the House of Representatives. And you never know what they're gonna ask.
Marketplace's John Dimsdale reports from Washington.
John Dimsdale: During most of Bernanke's two-and-a-half hours before the committee, he looked like he was watching a tennis match. His head bounced back and forth as he fielded questions from Republicans sitting to his right, appropriately, and Democrats on his left. Each side intent on getting a Fed endorsement of their particular brand of politics.
For example, Texas Republican Ron Paul tried to persuade the Fed chairman to put the nation's currency back on the gold standard.
Ron Paul: Do you think gold is money?
Ben Bernanke: No. You know, it's an asset. Would you say Treasury bills are money? I don't think they're money either. But they're a financial asset.
Paul: Why do central banks hold it?
Bernanke: It's a form of reserves.
Paul: Why don't they hold diamonds?
Bernanke: Well, it's tradition.
Paul: Some people still think it's money. I yield back. My time is up. Thank you.
Having dealt with the diamond standard, Bernanke turned to Michigan Democrat Gary Peters, who wanted the chairman to weigh in on an issue that has nothing to do with the business of the Federal Reserve.
Gary Peters: Would you comment a little on the balanced budget amendment and are you concerned about that for the future?
Bernanke: I would just like to say that it will be very important to make it sufficiently flexible to deal with different contingencies.
Questions like these pose a challenge for a central banker trying to stay above politics. Former Fed member Laurence Meyer, now with Macroeconomic Advisers, says, on average, fewer than 15 percent of the questions to the Fed chairman during these hearings have to do with monetary policy.
Laurence Meyer: The purpose of these hearings is to give each member of the committee an opportunity to try to get a soundbite out of the chairman that they can go back and use to support whatever their position is they're taking.
Meyer says all the chairman can do is not take the bait. He should stay calm and answer like the professor he used to be.
In Washington, I'm John Dimsdale for Marketplace.
Ryssdal: If you have ideas about what's best for the economy, you can test what they might do to the federal budget by playing our Budget Hero game. The game's updated with the latest budget numbers and political positions.