Bernanke Faces Grilling On Bear Rescue, Credit Crisis With Wires

Federal Reserve Chairman Ben Bernanke will go before Congress on Wednesday in his first public testimony since the rescue of Bear Stearns and the other central bank efforts to stem the credit crisis.

Ben Bernanke, President Bush's top economic adviser, speaks in the Oval Office at the White House after Bush named him to take over the Federal Reserve from retiring Alan Greenspan, in Washington, Monday, Oct. 24, 2005. It was the third time in as many years the president has turned to the 51-year-old Bernanke for a sensitive post. Bush named him to the Fed board in 2002, then made him chairman of the president's Council of Economic Advisers earlier this year. (AP Photo/J. Scott Applewhite)
J. Scott Applewhite

Bernanke is scheduled to talk about the U.S. economy's outlook to the congressional Joint Economic Committee starting at 9:30 am New York time.

The session will air live on

The Fed chairman met privately with House Republicans on Tuesday, and participants said he steered clear of saying the country is in a recession.

To try to contain the damage from the sickly economy, the Fed has aggressively cut interest rates to spur buying and investing by people and businesses. It also has taken a series of extraordinary steps to prop up the nation's financial system, which has been in danger of seizing up.

On March 16, the Fed backed a multibillion dollar lifeline as part of JP Morgan Chase's  eleventh-hour deal to buy out the troubled Bear Stearns, the nation's fifth largest investment house.

The central bank also -- in the broadest use of its credit authority since the 1930s -- agreed to temporarily let big investment firms secure emergency financing from the Fed, a privilege that previously had only been granted to commercial banks.

Those actions have prompted protests from Democrats and other critics, who contend that the Fed is bailing out Wall Street and putting billions of taxpayers' dollars at potential risk.

Members of the Senate Finance Committee have asked for details of the Bear Stearns rescue, including a description of the assets the Fed will take on from Bear to allow the deal to happen, in order to judge whether the deal poses any risk to US taxpayers.

But the Fed's recent actions have also brought some praise. Bernanke, who was criticized for being behind the curve of the credit crunch for most if not all of 2007, has won high marks in recent weeks.

“The Fed is riding the wave of financial instability and a threatening recession; it’s balance has been superb,” says Robert Brusca, chief economist at Fact And Opinion Economics. 

“Interestingly the Fed is being criticized both for going too slow and for cutting rates too low creating another new bubble,” adds Brusca. “I would point out that when critics say your policies are excessive in two different directions maybe those policies are just right.”

“I think they walked the line beautifully,” PIMCO portfolio manager Paul McCulley told CNBC recently. “I thought Ben did a great job.”

Not all are enamored with Bernanke or ready to declare him a genius.

“I remain unimpressed,” said economist Ram Bhagavatula, who’s managing director at the hedge fund Combinatorics Capital. Bhagavatula, who has previously said he’s been dumbfounded by the Bernanke Fed since early last fall, adds, “Fundamentally, the Fed is confusing liquidity provision and monetary policy.  The two are not the same.”  As a result he expects weak growth and nasty core inflation in the coming year.

Money manager Jim Awad, who’s been a mild critic of Bernanke along the way, says, “The jury is still out. He has been scrambling to catch up to the curve.”

--The AP and Reuters contributed to this story.