WASHINGTON, DC - Testifying before the Senate Banking Committee today, Federal Reserve Chairman Ben Bernanke defended the central bank's response to the global financial crisis.

U.S. Senator Jack Reed (D-RI), a senior member of the committee who has introduced and supported legislation to save and create jobs and pushed for strong new regulations over financial markets, questioned Bernanke about how to reduce unemployment and what role the Federal Reserve has played and should play going forward in overseeing banks and financial holding companies.

During the hearing, Reed noted that ten years ago under the Clinton Administration, the United States was running budget surpluses and unemployment was about 4.6% and we had income growth and economic growth across every level and today the economy is struggling under a $1.4 trillion dollar deficit and a national unemployment is at 10.2%.

"What happened?" Reed bluntly asked Bernanke, who is seeking a second term as Fed Chairman.

Bernanke did not assign blame to any single government entity, but he noted that the "financial crisis and a deep recession, which has dragged down tax revenues and created needs for -- for supporting people out of work and other important objectives. So a lot of what's happening right now -- of course, these enormous deficits we have this year and next year are not permanent. They're reflecting the current situation. But some of it will be permanent unless we begin to address the -- particularly the entitlement issue and the aging issue."

"So you would concur that our effort today to pass health care reform is critical to our economic future?" responded Reed.

Bernanke declined to comment on the overall health care bill, but said: "What I will just say is that I think an essential element would be to try to reform health care in a way that controls costs going out. That's -- that's going to be essential."

"And that's what the CBO has concluded in their evaluation of the Senate plan before us," replied Reed. "They've indicated that, going forward, there would be cost savings. And it -- I think, from my view, the faster we get this accomplished, then we can move on to some of the other issues we've talked about today."

Reed and Bernanke also agreed on the broader need for financial regulatory reform, which Senator Reed has long championed.

"A financial crisis of the severity we have experienced must prompt financial institutions and regulators alike to undertake unsparing self-assessment of their past performance," Bernanke stated in prepared remarks.

As Chairman of the Subcommittee on Securities, Insurance, and Investment, Reed has focused on a number of key concerns in today's financial markets, including: strengthening investor protections; ensuring the transparency of complex financial markets and products; and improving federal oversight of investment banks and securities firms.

Reed has introduced legislation to create the first comprehensive regulatory framework for derivatives and to strengthen oversight of hedge funds, private equity funds, venture capital funds and other private investments. After exposing lax oversight by the SEC under the Bush Administration, Reed has worked to beef up SEC enforcement and scrutiny of the financial sector. He authored legislation to reform the credit rating industry and improve the accountability and accuracy of credit ratings. He has also pushed for more accountability from the Federal Reserve, SEC, and Financial Accounting Standards Board.

"Eight years of economic mismanagement by the Bush Administration provided tax cuts for the rich, lax oversight of Wall Street, and unfunded wars in Iraq and Afghanistan. Under Republican leadership the national debt doubled from $5.6 trillion to $10.3 trillion. And today economic recovery is being hindered by that crushing debt. We need stronger oversight of Wall Street and for banks to start responsibly lending so we can get credit flowing to Main Street. We should also enact proven, cost-effective measures to save jobs, such as my work share proposal," concluded Reed.