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Ben Bernanke, chairman of the Federal Reserve, has told the US Senate that he would be unwilling to provide funds for a bail-out of the car sector, while seeking to set out the limits of the Fed’s current, interventionist role.
In a letter written to Chris Dodd, chairman of the Senate banking committee, and released by the committee on Tuesday, Mr Bernanke responded to a query by Mr Dodd as to whether the Fed could help give Detroit an emergency cash injection. “The Federal Reserve would be extremely reluctant to extend credit where Congress has actively considered providing assistance but, after due consideration, has decided not to act,” Mr Bernanke said in the letter, dated December 5.
He argued that the Fed’s large-scale interventions in recent months had all been focused on securing financial stability. “Lending to an auto manufacturing company would represent a marked departure from that policy, and would take us into distinctly new realms of policymaking,” he said. “In particular, it would raise the question as to whether the Federal Reserve should be involved in industrial policy, which has traditionally been outside the range of our responsibilities.”
In the letter, Mr Bernanke notes that the car industry accounted for nearly 3m jobs in 2007, and highlighted that the main issue determining the “Detroit Three’s” viability is “their ability to develop and produce vehicles that the public wants to buy”.