The New York Times
The Federal Reserve, faced with more criticism than its leaders anticipated, stepped up its counteroffensive on Wednesday as leading Republican lawmakers continued to attack its plan to spur the recovery.
The Fed chairman, Ben S. Bernanke, met with 11 members of the Senate banking committee to explain the decision to inject $600 billion into the banking system, a resumption of the Fed's bond-buying program aimed at lowering long-term interest rates.
In a speech on Wednesday, Eric S. Rosengren, president of the Federal Reserve Bank of Boston and one of the biggest advocates of the Fed's decision, said the plan could reduce the unemployment rate by a little less than half a percentage point by the end of 2012. "This would translate into more than 700,000 additional jobs that we would not have had in the absence of this monetary policy action," he said.
On Friday in Frankfurt, Mr. Bernanke intends to respond to international criticism of the Fed's decision, which has come from officials in Europe, and in China and other emerging markets.
Those actions, along with rare on-the-record interviews this week by William C. Dudley, president of the New York Fed, and Janet L. Yellen, the central bank's vice chairwoman, add up to an unusual and orchestrated attempt by the Fed to cast its decision in the most favorable terms and respond to a maelstrom of criticism - some partisan, some not - that has taken it by surprise.
Those objections persisted on Wednesday.
In a letter to Mr. Bernanke, four Congressional Republican leaders expressed "deep concerns" about the Fed's plan, known as quantitative easing.
"While intended to improve the short-term growth of the U.S. economy and help maintain a stable price level, such a measure introduces significant uncertainty regarding the future strength of the dollar, and could result both in hard-to-control, long-term inflation and potentially generate artificial asset bubbles that could cause further economic disruptions," the letter said.
The Republicans who signed the letter were the Senate minority leader, Mitch McConnell of Kentucky; Senator Jon Kyl of Arizona; Representative John A. Boehner of Ohio, who is in line to become the House speaker in January; and Representative Eric Cantor of Virginia, the No. 2 House Republican. They emphasized that the Fed should be insulated from political pressure but also said the central bank "should be open to receiving input and data from a wide range of sources."
However, the letter was more moderate in tone than recent complaints voiced by other Republican critics, like Representatives Mike Pence of Indiana, the chairman of the House Republican Conference, and Kevin Brady of Texas, who is in line to lead a subcommittee on trade.
By contrast, in the Fed's corner on Wednesday was Thomas J. Donohue, president of the United States Chamber of Commerce, which poured money into the midterm campaigns to defeat Democrats.
"The Fed has over many, many, many years been particularly helpful to this government and to this country in dealing with financial crises, and by the way, they always make money on it," Mr. Donohue told reporters, referring to the fact that the Fed each year turns over to the government the profit it makes as a byproduct of its investments. "We're hopeful that the Fed's judgments turn out to be very positive for job creation and economic expansion."
Mr. Donohue suggested that some of the criticism of Mr. Bernanke had gone too far, praising Mr. Bernanke as a scholar of the Depression and saying, "We must maintain the independence of the Fed and be very, very careful not to louse that up on Capitol Hill."
As for the senators who met with Mr. Bernanke on Wednesday, the Fed seemed to score some sympathy from skeptics, if not outright support.
"I thought he made good points," Senator Judd Gregg, a New Hampshire Republican, said afterward. "I still am not necessarily fully signed on to the process, but that's why we have an independent Fed that's supposed to make these calls. He made a very strong case for what they've done." Mr. Gregg said he still had reservations, adding "once you start printing money, it's pretty hard to control."
Senator Evan Bayh, Democrat of Indiana, said Mr. Bernanke mentioned the potential for quantitative easing to help create jobs.
"He said he was absolutely committed to keeping inflation in check and that all indicators showed that it was benign," Mr. Bayh said. "He also indicated that as they go forward, they were looking at a variety of data to see if there are any unanticipated adverse consequences of their actions and that if there were any, they would adjust what they were doing."
Mr. Gregg and Mr. Bayh, who did not seek re-election this year, said in separate interviews that the Fed and monetary policy were carrying the burden because of failures in fiscal policy, though they disagreed on what those failures were. Mr. Bayh cited gridlock in Congress over short-term measures to stimulate the economy. Mr. Gregg said the Fed was acting because of the failure to get spending and deficits under control and reassure the markets.