Federal Reserve Chairman Ben Bernanke sympathized with the "Occupy Wall Street" movement's dissatisfaction with economic inequality at a press conference Wednesday, but said protesters should not blame the Fed for bailing out the banks.
Bernanke responded to a question about "Occupy Wall Street" by saying that he was dissatisfied with the state of the economy as well, particularly with the high unemployment and income inequality.
"It's been going on," he said, "increases in inequality have been going on for at least 30 years. But, obviously, as that has continued we now have a more unequal society than we've had in the past."
The Fed gave out $16.1 trillion in emergency loans to U.S. and foreign financial institutions between Dec. 1, 2007 and July 21, 2010, according to figures produced by the government’s first-ever audit of the central bank.
Out of all borrowers, Citigroup received the most financial assistance from the Fed, at $2.5 trillion. Morgan Stanley came in second with $2.04 trillion, followed by Merill Lynch at $1.9 trillion and Bank of America at $1.3 trillion.
"I think that the concerns about the Fed are based on misconceptions," Bernanke continued. "The Federal Reserve was involved, obviously, in trying to stabilize the financial system in 2008 and 2009, a very simplistic interpretation of that was that we were doing that because we wanted to preserve, you know, banker salaries. That is obviously not the case."
"What we were doing was trying to protect the financial system in order to prevent a serious collapse of both the financial system and the American economy. And we needed to take those steps. If we hadn't taken them the consequences would have been dire."
The audit also found that the Fed mostly outsourced its lending operations to the very financial institutions which sparked the crisis to begin with, and that they delegated contracts largely on a no-bid basis. The GAO report recommends new policies that would eliminate such conflicts of interest, and suggests that in the future the Fed should keep better records of their emergency decision-making process.
The audit was conducted on a one-time basis, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed last year.
When Bernanke was asked about the "Occupy Wall Street" protests in early October, he said that excessive risk taking on Wall Street and the failure of financial regulators “had a lot to do” with the recession.
“Well, I would say very generally I think people are quite unhappy with the state of the economy and what’s happening,” Bernanke said. “They blame, with some justification, the problems in the financial sector for getting us into this mess, and they’re dissatisfied with the policy response here in Washington.
“And at some level, I can’t blame them,” he added. “Certainly 9 percent unemployment and very slow growth is not a very good situation.”
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With prior reporting by Stephen C. Webster