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Hearing Of The House Financial Services Committee - Monetary Policy And The State Of The Economy


Location: Washington, DC

Mr. Chairman: I first want to congratulate Chairman Bernanke on his
confirmation for a second term as Chairman of the Federal Reserve Board
and welcome him back to the Committee, although I suspect this Committee
appearance might not be as cordial as some Humphrey-Hawkins appearances
have been. This is a tough political environment that has grown more
frustrating to all of us as a result of high unemployment, economic despair
and growing deficits and debt.

In ordinary times during my tenure on this Committee, these semi-
annual Humphrey-Hawkins hearings have focused almost exclusively on the
Fed's use of interest rate changes to impact economic activity and control
inflation. However, these are not ordinary times. Inflation remains a non-
issue at only 0.2% as of January 2010. It is obvious that short-term concerns
about inflation must, for the time, take a back seat to urgent concerns about
continuing job losses.

The Federal Reserve Act of 1913 and Federal Reserve Act
Amendments of 1977 require the Fed to pursue a "dual mandate" of
fostering maximum sustainable employment and stable prices. The "stable
prices" part of this mandate will not, and probably should not, receive much
attention today. I was often at odds with former Chairman Greenspan about
his and other economists' notion that that there is some "natural rate of
unemployment" of around 4.5%. I simply never accepted the notion that
any percentage of unemployment was acceptable when there were people
who wanted and needed to work. Now at least 9.7% of the people who want
to work can't find jobs and I doubt that anyone would argue that this is
acceptable. Unfortunately, in urban and minority communities, the
unemployment rate is even higher and this saps the potential of millions of
people to contribute to the national economy and lead productive lives.

These are indeed perilous times. Some labor experts estimate that
6.3 million Americans have been unemployed for 6 months or longer and
that the economy needs at least 100,000 new jobs a month just to absorb new
entrants into the labor force. Who knows how many people have given up
looking for work and are no longer counted in unemployment statistics?
With more than 15 million people officially jobless, it is likely that even a
strong recovery will leave many jobless for years. We could be perilously
close to creating a class of "permanently unemployed."

Behind these statistics are painful stories of real people with dreams and aspirations to
provide for their families and contribute to their communities. They simply
can't fulfill those aspirations without jobs.

Against this backdrop, the question I really need to have addressed
today is what tools the Fed has in its toolkit to reverse the trends and spur
job growth in the 12th District of North Carolina and elsewhere in America.
I asked a similar question at last year's Humphrey-Hawkins hearing and, at
that time, Chairman Bernanke vowed to take "strong and aggressive" action
to halt the economic slide and improve job growth. One year later,
unemployment has gotten worse, although there are small signs of recovery.
Today, I hope to hear specifics on the Fed's plans to spur job growth and
meet the other half of its dual mandate -- fostering maximum sustainable
employment. If there are things Congress can and should do to help, I stand
ready to help.

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