Bernanke Confronted by Barney Frank, Ron Paul

Federal Reserve Chairman Ben Bernanke was put on the defensive Wednesday on Capitol Hill during his second day of his semiannual monetary policy testimony.

In one exchange, Rep. Ron Paul, R-Texas, challenged Bernanke on "secrecy" at the Fed and asked him which branch of government has the right to manage monetary policy.

"It is a well-established fact that an independent central bank will provide better outcomes," Bernanke said. "There's no constitutional reason why Congress couldn't take over monetary policy. If you want to do that, that's your right to do it, but it wouldn't be good from an economic policy point of view."

Rep. Barney Frank, D-Massachusetts, asked about the fragility of the economic recovery and whether the Fed was able to fulfill its dual mandate of supporting employment while maintaining price stability.

Bernanke warned the collective impact of spending cuts and tax increases that will hit at the end of the year could come to about 5 percent of gross domestic product, “which, if it all hit at the same time, would be very negative for growth.”

In dealing with this looming "fiscal cliff," Bernanke told Congress, “It is important to combine a more gradual approach with a longer-term plan to address sustainability.”