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Klobuchar Says Fed Needs to Restore Public Confidence

Questions Bernanke on how Federal Reserve can prevent future financial meltdowns

April 2, 2008

Washington, D.C. – In an exchange with Federal Reserve Chairman Ben Bernanke before the Joint Economic Committee today, U.S. Senator Amy Klobuchar asked how regulators can prevent future crises such as the implosion of the investment bank Bear Stearns, and how the government can stop the ripple effects of the recent meltdown in U.S. financial markets.

Klobuchar, a member of the Joint Economic Committee, also asked Bernanke what tools the Federal Reserve needs to stabilize and adequately regulate the fast-changing investment industry. Bernanke testified today before the Committee on the health of the economy and regulation of financial markets, acknowledging that problems in the housing market are now spilling over into the broader economy.

“The country’s financial-market crisis is rapidly becoming a middle-class crisis,’’ Klobuchar said. “We need prompt action to restore the public’s confidence in the financial markets, the housing market and the entire economy.’’

Klobuchar is a sponsor of the Foreclosure Prevention Act, which would restore stability to the nation’s housing markets by funding foreclosure-prevention services and helping states shore up communities hard hit by the foreclosure wave. The Senate is expected to vote soon on major housing legislation.

Klobuchar also asked Bernanke whether the federal government’s large budget deficits are contributing to uncertainty in the financial markets.

“One in 12 federal tax dollars now goes to paying interest on the federal debt,’’ Klobuchar noted. “It seems to me that restoring fiscal responsibility in Washington is crucial to restoring the confidence of our financial markets.’’