By Steven K. Beckner

Asked what degree of confidence he has in his ability to control
inflation, Bernanke replied, “One hundred percent.”

Bernanke, known as a scholar of the Great Depression at Princeton
University before becoming a Fed governor in 2002, painted the direst of
pictures of what would have happened if the Fed had not acted as it has
over the past few years.

“Unemployment would be much, much higher,” he contended. “It might
be something like it was in the Depression. Twenty-five percent.”

“We saw what happened when one or two large financial firms came
close to failure or to failure,” he continued. “Imagine if ten or 12 or
15 firms had– had failed, which is where we almost were in the fall of
2008. It would have brought down the entire global financial system and
it would have had enormous implications, very long-lasting implications
for the global economy, not just the U.S. economy.”

Addressing weak bank lending, Bernanke said “a lot of small
businesses are not seeking credit, because, you know, because their
business is not doing well, because the economy is slow.”

He said other small businesses “are not qualifying for credit,
maybe because the value of their property has gone down. But some also
can’t meet the terms and conditions that banks are setting.”

Bernanke said the Fed wants banks “to take risks, but not excessive
risks. we want to go for a happy medium.”

“And I think banks are back in the business of lending,” he
continued. “But they have not yet come back to the level of confidence
that –or overconfidence –that they had prior to the crisis. we want
to have an appropriate balance.”

In other comments, Bernanke reiterated his desire to see a
long-term plan to reduce the federal deficit while cautioning against
premature fiscal tightening that could hurt the recovery.

Venturing into tax policy, he said he would favor “cleaning up the
tax code.”

“The tax code is very inefficient,” he said. “Both the personal tax
code and the corporate tax code. By closing loopholes and lowering
rates, you could increase the efficiency of the tax code and create more
incentives for people to invest.”

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“Between the peak and the end of last year, we lost eight and a
half million jobs,” Bernanke continued. “We’ve only gotten about a
million of them back so far. And that doesn’t even account (for) the new
people coming into the labor force.”