WASHINGTON (MNI) – Following are excerpts of Federal Reserve
Chairman Ben Bernanke’s remarks during the Semiannual Monetary Policy
testimony before the Senate Banking Committee Thursday:

QUESTION: You’ve raised the possibility now that if economic
circumstances warranted you would consider open the door to an
additional round of securities purchases. So what would no doubt be
dubbed QE3. I guess my concern is that what’s wrong with this economy is
not fundamentally monetary policy, it’s other things. And so I would
just ask you to comment on what you see that is wrong with our economy
that QE3 would fix. What is the theory that another round of purchases
will somehow generate the economic growth that we lack:

Bernanke’s ANSWER:

Our goal is to try to meet our mandate of maximum employment and
price stability, which is why we run monetary policy as we do.

I don’t think that our policy would prevent a loss of confidence if
creditors lost confidence in the Treasury, which would drive up interest
rates. It hasn’t happened yet. But I don’t think it’s because of us. I
think it’s because people still think that they have confidence in our
government’s ability to make its payments.

These asset purchases are recognized as unconventional but they
work more or less in terms of their effect on the economy (…) in the
same way that ordinary monetary policy works by easing financial
conditions and lowering interest rates, and providing stimulus through
that mechanism.

Now you may be entirely correct a) that it might not be needed, and
b)that it might not be particularly effective given the configuration of
the problems that we have, for example (…) if the problems really
arise from the public sectors that are not responsive to interest rates.

So those are certain things we take into account. Now we are not
proposing anything today.

The main message I wanna leave is that this is a serious situation
that involves significant losses [even in terms of] economic potential.
The Federal Reserve has a mandate and we want to meet that mandate. And
to do that we just want to make sure that we have the options when they
become necessary. But at this point we’re not proposing to undertake
that option.

** Market News International Washington Bureau: 202-371-2121 **