Bernanke: Fed faces ‘tough choices’

The Federal Reserve ended months of suspense on Thursday by announcing it is still not ready to raise interest rates from record lows. But the Fed still faces tough choices as the economy continues its recovery, its former chairman said during a visit to Charlotte.

Speaking to Charlotte-area students gathered at Myers Park High School, Ben Bernanke also said the central bank must keep educating the public about an agency some people are suspicious of.

“I think most people really don’t understand what the Fed is,” Bernanke told the roughly 800 high school students attending an event organized by Charlotte’s Echo Foundation.

“They don’t understand what it does,” he said, hours before the Fed announced its decision on interest rates.

Bernanke declined to share his views on how the Fed should approach interest rate policy when asked about the subject by the students. He also declined to discuss the Fed’s Thursday decision when asked about it by a reporter at a reception for an evening awards event in uptown Charlotte.

During Echo’s annual awards ceremony, Bernanke spoke to about 350 attendees, a group that included current and former business leaders. Charlotte philanthropists Sandra and Leon Levine presented Bernanke with their inaugural Medal of Life award.

At the high school event, Bernanke touted the Fed’s “central role” in helping the economy recover from the recession and stabilizing its financial system.

The regulator “needs to keep doing what it’s been doing – in the sense that on the recovery side it needs to provide appropriate monetary policy that will allow the economy to continue this long process towards a more normal condition,” Bernanke said.

“And that’s a process that’s underway,” he said. “Unemployment has fallen. (Economic) growth has come back, to some extent.”

But some people remain leery about the regulator, Bernanke said. “They’re a little suspicious of it,” he said. “They think the Fed is not representing their interests necessarily.”

‘Great confidence’

Bernanke said he has “great confidence” in Fed Chair Janet Yellen, noting that her tenure with the Fed began before his, which started in 2002. Bernanke said it’s important for the Fed to remain transparent with the public, which Yellen “fully understands.”

“I think it’s important for her to keep communicating broadly, and not just to market participants and Wall Street,” he said. “She needs to get out – she’s doing that, I’m not saying she’s not – but I think it’s important for the Fed in general to explain to people what they do and why they do it.”

Bernanke noted that, when he chaired the Fed, the regulator held its first press conference after a policy meeting. That press conference was held in 2011, five years after he became chairman.

Yellen led one Thursday afternoon after the Fed announced it will not increase the federal funds rate, the interest banks charge each other on overnight loans. The rate has been near zero since the Fed slashed it in 2008 to help the economy weather the financial crisis.

“I think the Fed is acting as part of its overall strategy, which has been to provide enough monetary support so that our economy can recover, and we have recovered quite a bit,” Bernanke said. “But it’s still a complicated situation, and they’re going to have to make some tough choices.”

Charlotte ties

Thursday’s appearance was the third Charlotte speech for Bernanke in eight years. The other two took place in 2007 and 2009.

Bernanke grew up in Dillon, S.C., and visited his maternal grandparents in Charlotte as a child. Later, his parents and brother lived in Charlotte.

He talked about his family’s ties to Charlotte during the awards event, held at the McGlohon Theater. His mother’s parents were immigrants from Lithuania who settled in Charlotte in large part because of the “vibrant and longstanding Jewish community here.”

Bernanke said his maternal grandfather, Harold Friedman, was a Torah reader at Charlotte’s Temple Israel, where Bernanke’s parents were married.

“I suspect there’s still a few Charlotteans around, maybe one or two here, who had their bar mitzvah training (from) Mr. Friedman,” Bernanke said.

Defending Fed actions

Bernanke defended “unpopular” actions the Fed took in response to the financial crisis, including the bailout of big banks, saying such steps were “absolutely necessary.”

Critics have accused the Fed of ignoring warning signs leading up to the crisis. In December 2007, Bernanke said he did not “expect insolvency or near insolvency among major financial institutions,” according to transcripts of Fed policy meetings.

Three months later, investment bank Bear Stearns Cos. was saved from bankruptcy in a deal with JPMorgan Chase & Co.

Tom Ross honored

Echo also gave University of North Carolina system President Tom Ross the 2015 Echo Award Against Indifference.

In January, the university system’s Board of Governors forced him to resign while praising his performance. The move was seen as a political ouster engineered by a board that had transformed from bipartisan to majority Republican since Ross became president in 2011.

Ross, who received a standing ovation Thursday, said accepting the award was an emotional moment. Ross was presented with a book of letters written to him by everyone from former First Union CEO Ed Crutchfield to Ross’ daughter.

Ross did not speak directly about his resignation in a speech but appeared to allude to it.

“I hope I’ve made some small difference in the struggles against indifference, and I can assure you that I have no plans to cease and desist,” he said. “Especially at this particular time in my life, with all that has been swirling around during this past year, tonight means more to me than I can express.”

This story was originally published September 17, 2015 at 1:16 PM with the headline "Bernanke: Fed faces ‘tough choices’."