Reappoint Bernanke, He's a 'National Hero': Welch

Federal Reserve Chairman Ben Bernanke deserves to be reappointed, because he did a great job in saving the US banking system from collapsing, Jack Welch, author of "Winning" and "Straight from the Gut," told CNBC Thursday.

"I think he saved the system, I think he's a national hero," Welch said. "I think Bernanke seems to be a guy operating on a clear intellectual framework. This guy's done a hell of a good job."

The financial system overhaul proposed by the Obama administration risks politicizing the Federal Reserve, and the government should focus on regulating behavior rather than overhauling the whole economy to prevent a future economic crisis from taking hold, he added.

"My whole feeling is let's slow down. We're touching every corner of this economy," former GE CEO Welch said, referring to the Obama administration's reform packages in healthcare, environment and now the financial sector.

"I'm telling you, you regulate behavior and you get better results. Through management, through boards… stronger leadership," he added.

GE is the parent company of CNBC.

The restrictions imposed on US banks under the Troubled Assets Relief Program (TARP) made them uncompetitive against European rivals, and even if those who paid back their TARP funds broke free, there are still some US banks who are suffering, he said.

"In the banks you got a compensation cap on domestic banks. Bank of America and Citigroup are stuck there, while Deutsche Bank and UBS can go there and pluck employees," Welch told "Squawk Box."

Politicians think differently from business people and this is why the government should not try to run companies, Welch said. "In their bones, they're always politicians. A political animal, by its nature, is different than a business animal."

Economic indicators will show more improvement this month than last month but the US economy's growth level is likely to be around 2 percent for a while, while government plans are made on assumptions of between 3.4 percent and 4 percent, he said.