Sunday, 16 June 2013

Bernanke - We are the agent of the Treasury

Here is a transcript of a section of Ben Bernanke's testimony to the Joint Economic Committee on May 22 in response to a question by Sen. Pat Toomey about how the Fed would have dealt with the effect of hitting the debt ceiling.

(1:34:25) Sen Toomey: So clearly there were plans regarding how to deal with processing of Fed payments, for instance, and other things. Could you give us a sense of what those plans consist of and what you can tell us of those plans?
(1:34:39) Ch. Bernanke: Well, my memory won't be complete, but we looked at our systems and our ability to make payments to principal and interest holders. For the most part we found that we were able to do that with a few possible exceptions - people holding savings bonds and few things that are not as easily connected to the system. We also had some discussion of the kind of policy we would have with banks - with discount window lending would we accept a defaulted treasury - all kinds of things that were contingency planning if this were to happen. What we did not do was directly engage the private sector for any contingency planning. We were mostly looking at our internal systems and our ability to address whatever directions - we are the agent, of course, of the Treasury and it's our job to do whatever they tell us to do. We were just working through our capacity both as an agent and managing the payment system and also as a bank supervisor to deal with a possible default if the debt ceiling was not raised.
h/t to Stephen Kelton for the original tweet 

There are a couple of other gems in this testimony as well

(0:39:50) Ch. Bernanke: Well first let me say, of course, Congress sets the mandate for the Federal Reserve and so Congress has the right, of course, to set the mandate any way it likes.
(1:15:17) Ch. Bernanke: The Fed is doing what Congress told it to do, which is doing our best to promote maximum employment and price stability