An Open Interview With the Honorable Ben S. Bernanke

Federal Reserve Chairman Ben Bernanke spoke about economic recovery with cautious optimism during a candid interview with ABC News veteran Sam Donaldson on June 7. At the event, which capped off the Woodrow Wilson Center's Board and Council dinner, Donaldson, who is also the Wilson Council's president, asked Bernanke about the pace of economic recovery in the United States and abroad.

"My best guess is we will have a continued recovery, but it won't feel terrific," said Bernanke. He said consumer spending and investment are on the rise, but unemployment is expected to "remain high for a while and that means that a lot of people are going to be under financial stress."

While the moderately paced recovery is good news, Bernanke expressed concern that the modest 3 percent economic growth so far this year is not enough to significantly reduce the unemployment rate, currently at 9.7 percent. And a shaky labor market, he said, means consumers are cautious about spending and not taking as many entrepreneurial risks.

Bernanke said the private sector is providing a sustained recovery path, and that many banks, as they repay the government bailout loans in full with interest, are turning toward the private sector for capital to increase their lending capacity.

To quell fears about future bailouts, Bernanke said the financial regulatory reform bill now circulating in Congress will help address the problem of financial firms being "too big to fail." The proposed measures include tougher regulations to ensure larger firms have adequate capital; a "resolution regime" to close failing firms safely; and "living wills" that require companies to plan for their potential downfall without destroying the financial system.

Asked when the Fed might raise interest rates again, Bernanke alluded to a future time when unemployment, inflation, and the European financial crisis were more under control. He said the Fed is monitoring the European crisis, confident that European leaders are committed to preserving the euro zone. A massive euro stabilization package is expected to cover the debt obligations of Greece, Spain, and Portugal, he said, and these countries are implementing further measures domestically to speed recovery.

Responding to an audience member's question on China, Bernanke underscored the important bilateral trade relationship, as the United States is a major buyer of Chinese goods and the Chinese government is the largest buyer of U.S. government debt. "There is a real desire on both sides to engage,' he said.

This event was the culmination of "A Day at the Wilson Center" that included the Board, Wilson Council, and WilsonAlliances, the Center's corporate membership group.

By Dana Steinberg
Kent Hughes, Program on America and the Global Economy