Federal Reserve Chairman Ben Bernanke told a Senate panel on Wednesday that economic recovery should begin soon, albeit slowly at first. Martin Baily and New Jersey Republican Congressman Scott Garrett spoke with Ray Suarez about the testimony.
RAY SUAREZ: Martin Baily, is Congress being too hard on the Federal Reserve chairman?
MARTIN BAILY, Brookings Institution: Yes, I think they are. I think he's done a magnificent job in managing this crisis. He really was thrown into what has been a horrendous period, and he's kept the economy afloat, he's kept the financial sector afloat, and I think he should get a lot of credit for it.
Now, did he make some choices or mistakes along the way? Quite probably he did. Did he put some pressure on people? Quite probably he did. But those are things that you have to do in a very difficult situation that he faced.
This notion of auditing monetary policy I think is just a terrible idea. I think markets would react negatively to it. I don't see what we gain out of that. I think we probably would see interest rates rise.
We already have the ability to question Bernanke. He testifies regularly. So I don't see what positive we would get out of that.
RAY SUAREZ: Well, you heard the congressman. Do you think you know everything that you would want to know about the nature of the Bank of America takeover of Merrill Lynch, for instance?
MARTIN BAILY: Well, remember what we have in our system is we choose people very carefully. The chairman of the Federal Reserve is chosen by the president, approved by Congress. He has an expert staff. And we delegate to him the authority to run monetary policy, together with the other members of the Board of Governors.
So I think to go in and try to micromanage what he's doing is a bad idea. If we have a general fighting a war, we give him a chance to fight it, and he has to make tough decisions, he has to make decisions very quickly. Bernanke had to make decisions over the weekend.
Now, under the proposed reforms, we are asking that the secretary of treasury give approval if the Federal Reserve is going to expend, put out Treasury money, is going to rescue an institution or to put it back on its feet, so I think that's an appropriate thing to do, and I think the secretary of treasury, working together with the Federal Reserve, can do this quickly.
But I don't think you can necessarily come back to Congress or try to audit what everybody said. That just doesn't work.
Read the full transcript at PBS' NewsHour »