Congressman Cleaver Comments on Chairman Bernanke's Testimony

Congressman Cleaver Comments on Chairman Bernanke's Testimony

Today, Chairman Ben S. Bernanke made his second Congressional appearance since being sworn in to his first four-year term as Chairman of the Federal Reserve Board of Governors. Chairman Bernanke appeared before the House Financial Services Committee for his second quarterly report to Congress. Although time for oral comments and questions was extremely limited, Congressman Emanuel Cleaver presented a number of written concerns and questions to the Fed Chairman.

The Committee was concerned about the drop in real wages because of the increase in gas prices. "The miniscule increase in wages has been more then offset by the rapid rise in gas prices. When wages rise one percent but gas prices double, it is not a formula for good financial health," said Congressman Cleaver.

Additionally, wages adjusted for the effects of inflation have not risen at all over the past three years. During a period when the corporate profit share of national income has increased by nearly six percentage points, worker compensation has lost nearly three percentage points. Deficit spending has exploded during this same time period as well.

"The increase in energy prices is clearly making the economy worse off," said Chairman Bernanke.

"I am concerned that the Federal Reserve might have been overzealous in raising interest rates every two months. Each time interest rates increase, the effect is felt by American families. Credit card rates raise, housing starts begin to wane, and business investment decreases," said Congressman Cleaver.

"I am still worried about where monetary policy is headed. Asian central banks hold over $2 trillion worth of U.S. debt. Japan and China are the major servicers of our foreign debts; additionally, OPEC nations in the Middle East hold over $50 billion of our debt. Some foreign central banks have indicated plans to limit their dollar holdings and invest more of their holdings in the currencies of countries other than the United States. I am concerned that the United States could be hurt by our continued reliance on foreign central banks to finance our debt, given that central banks are also rethinking their currency holdings," said Cleaver.

"I think the Chairman recognizes the risk, but did not recommend a solution. At our last hearing, he said that if those nations holding our debt decided to raise the rates they are charging, it would be an 'uncomfortable adjustment' for our nation," Cleaver said, "I am concerned we are moving towards that point."

"In his testimony, the Chairman pointed out that the American economy is remarkably resilient and our worker's productivity is the envy of the world. In that, he is correct. My concern is that our economy is not working for everyone. We seem far more concerned about boosting the incomes of the wealthiest Americans, while denying our responsibility to raise the minimum wage for those struggling to make ends meet." Cleaver added, "We can not sustain this position. We are borrowing to pay for our tax cuts, the war effort, and Katrina recovery. It is an unfair burden we are placing on our children, grandchildren, and, potentially, even their children."

http://www.house.gov/list/press/mo05_cleaver/BernankeComments.html