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And I'm Robert Siegel. Another downbeat assessment of the economy today from Ben Bernanke. The Fed chairman was on Capitol Hill, giving lawmakers an update. He did not offer any new proposals or make any new commitments to stimulate the economy. But Bernanke did field tough questions on a different topic: Why the Fed didn't act more forcefully when it learned that banks were manipulating a crucial interest rate? Here's more from NPR's John Ydstie.
JOHN YDSTIE, BYLINE: Testifying before the Senate Banking Committee, Bernanke said U.S. growth appears to have slowed in the first half of the year, and he said progress on reducing the unemployment rate is frustratingly slow. He again warned of risks to the economy from the debt crisis in Europe and the fiscal cliff at the end of this year. That's when tax cuts expire and automatic spending cuts take effect in the U.S. That could plunge the economy back into recession if Congress and the president don't do something about it. Bernanke told the senators that Fed policymakers haven't decided yet whether to provide additional support to the economy. But he said...
BEN BERNANKE: We are looking for ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labor market.
YDSTIE: Like most Democrats on the committee, New York's Charles Schumer has no doubt that more action by the Fed is needed.
SENATOR CHARLES SCHUMER: You certainly agree that we're having a much rougher time than we ever imagined getting unemployment down.
BERNANKE: Yes, that's true.
SCHUMER: So get to work, Mr. Chairman.
YDSTIE: But many Republicans, including South Carolina Senator Jim DeMint, argued that the Fed has already reduced interest rates too far.
SENATOR JIM DEMINT: I mean, you're well aware that keeping interest rates where they are, are costing Americans about $400 billion a year on lost interest on any savings that they might have, so there's a cost to that stimulus effect.
YDSTIE: DeMint also argued the Fed's stimulus is leading to a weakening of the dollar, though there's no conclusive evidence at this point that that's the case. While Republicans and Democrats differed on whether the Fed should provide more stimulus for the economy, there was a bipartisan effort to understand why the Fed wasn't more aggressive in addressing the rigging of a key benchmark interest rate, the LIBOR. The Fed discovered the manipulation late in 2007. The LIBOR rate is set in London under the auspices of the British Bankers' Association, and it's the benchmark rate for trillions of dollars worth of contracts worldwide, including many derivatives and adjustable rate mortgages in the U.S.
More than a dozen big banks pool data to set the rate, including three American banks. Barclays, a big British bank, has already been fined more than $450 million for manipulating the rate, and a number of other banks are reportedly under investigation. Pennsylvania Republican Pat Toomey wondered why the Fed hadn't been more aggressive.
SENATOR PAT TOOMEY: Why have we allowed it to go on the old way when we knew it was flawed for the last four years with trillions of dollars of transactions?
BERNANKE: Because the Federal Reserve has no ability to change it.
TOOMEY: You have enormous influence...
BERNANKE: It is...
TOOMEY: ...over the institutions engaging in this.
YDSTIE: Republican David Vitter, of Louisiana, wanted to know if U.S. banks were involved in wrongdoing.
SENATOR DAVID VITTER: So as we sit here today, do we know definitively that no U.S. banks were guilty of the same manipulation?
BERNANKE: No, we don't know that.
VITTER: Well, if we don't know that, it seems like somebody dropped the ball; the fact that we're four years later and we don't know that.
YDSTIE: Bernanke defended the Fed saying it had provided information to the British and U.S. regulators in charge of enforcement shortly after it discovered the LIBOR manipulation. He said the investigation is ongoing, and two U.S. banks had been asked to provide information on their activities. Bernanke also said either the LIBOR has to be reformed or market participants should find another index for their contracts, one where the benchmark is set through actual market transactions. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.