Bernanke defended its record expansion of monetary ( Fed Policy ).

Federal Reserve chairman, Ben S. Bernanke defended its record expansion of monetary stimulus at a meeting with key senators and Republican lawmakers intensified their criticism of the policies of the central bank chief.

Bernanke, in a closed-door meeting yesterday, said the Fed's plan to buy $ 600 billion in assets would stimulate job growth, keeping inflation under control. John Boehner, the presumptive Speaker of the House, and three other Republicans Bernanke sent a letter expressing "deep concern" about a policy that he said risked weakening the dollar and fueling asset bubbles.

Bernanke, for months to prepare financial markets for the second round of stimulus, which was announced Nov. 3, the day after the elections that gave Republicans control of the House of Representatives in a wave of anti-government . St. Louis, James Bullard, Bernanke said the Fed could have done a better job of explaining how their policies differ from federal bailout of financial institutions.

"What is really only common monetary policy was confused, I think, with other government programs, recovery programs," Bullard told reporters yesterday after a speech in St. Louis. "It depends on us to try to improve communication on monetary policy."

Bernanke yesterday's letter was also signed by Rep. Eric Cantor of Virginia, Senate Republican leader Mitch McConnell of Kentucky and Sen. Whip Jon Kyl of Arizona.

Dollar Strength

"While the intention of improving short-term growth of U.S. economy and help maintain a stable price level as a measure introduces significant uncertainty about the future strength of the dollar," the letter said. The purchases could "result both difficult to control inflation over the longer term and potentially generating artificial asset bubbles."

Mark Calabria, a former aide to Senator Richard Shelby of Alabama, the ranking Republican on the Banking Committee, said the letter indicates that congressional leaders are taking advantage of an important issue to his political base. McConnell made a similar calculation this week to abandon its opposition to the ban on budget "assigned" to the projects of legislators pet, Calabria said.

"They are responding to what they believe are some of the Tea Party and Republican concerns," said Calabria, now director of financial regulation studies at the Cato Institute in Washington, a policy research group that favors free markets. "They are feeling the Fed and Bernanke are not very popular right now."

Palin Letter

Sarah Palin, vice presidential candidate 2008 that helped propel some Republicans to victory this year's election, today renewed his criticism of the Fed in a letter to the Wall Street Journal.

"It's time 'refudiate" the idea that this dangerous experiment in the printing of 600 billion U.S. dollars out of nowhere, with nothing to back it up, magically solve economic problems, "wrote Palin, who said in New York Times and ABC News reports this week it is considering a 2012 race for president.

The difference between yields on Treasuries widened 2 to 10 years after criticism from Republicans yesterday. The difference between yields on 2 - and 10-year debt rose to 2.39 percentage points and was close to 2.45 percentage points the previous day that touched the highest since July 16.

Yields on longer-term debt are growing faster investors demand a higher premium against the risk that Fed officials will not be able to control rising inflation after completing the purchase of assets.

Mandate for change

letter yesterday from Republicans was more than a week in which 23 people, including former Republican government officials and economists, Bernanke called for an end to the stimulus, while Republican lawmakers proposed stripping the Fed of its mandate to promote full employment.

Republicans "do not trust the Fed and see it as rewarding bad behavior of the opposition," said Vincent Reinhart, a resident scholar at the American Enterprise Institute in Washington and former Federal Reserve chief division counsel.

second round of central bank purchases of assets works out to about $ 110 billion as of June because the New York Fed is also the reinvestment of the proceeds from the Fed's holdings of mortgage debt maturing. Covering about what bond traders will consider funding the Treasury monthly next year's needs.

"The monetization of deficits far easier and does not address the problem" in view of the Republicans, "said Reinhart.

Bear Stearns Rescue

The Republican attacks are among the toughest since the Federal Reserve rushed to rescue the financial system with the support of Bear Stearns Cos. and American International Group Inc., during the financial crisis.

Bernanke, the meeting of the Senate, said he and his colleagues "remain absolutely committed to not letting inflation or inflation expectations get out of control," said Sen. Evan Bayh, Democrat of Indiana, told reporters after the 40-minute session.

The Fed chief told senators that central bank officials "want to do what you can now encourage more growth rather than less," said Bayh. The second round of previous purchases followed a 1.7 trillion U.S. dollars of the bond program with purchase option. Economists call quantitative easing, and that the strategy aims to increase the amount of bank reserves.

Focus on inflation

Sen. Bob Corker of Tennessee and Rep. Michael Pence of Indiana are proposing legislation that would eliminate the Fed's mandate of full employment and have the central bank's focus on inflation alone.

"The Federal Reserve has not received the message," said Pence in the House yesterday. "Printing money is not a substitute for sound fiscal policy."

House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, came out in defense of Bernanke, told reporters that his actions had been "very useful" and "activity prevented much worse."

"They have to use monetary policy tools that help us to reduce the unemployment rate," said Senator Bernard Sanders, a Vermont independent, in a separate meeting with reporters. "I do not think that we will deliver it. I will not give up supporting it."

Bernanke training as a young economist is the book of composition of the two disasters in the history of the Federal Reserve - the Great Depression and the inflation of late 1970. Bernanke, 56, has pioneered research with New York University professor Mark Gertler showing how the financial crisis may hasten the crisis, and criticized the Bank of Japan for not responding more forcefully to deflation.

Avoid Disaster

"The disaster they want to avoid is now becoming like Japan," Gertler said in an interview yesterday. "The Republicans do not understand the risks of deflation. The economy is weak right now that there is a risk that expectations of falling prices set in, and that will raise real interest rates."

However, hostility to the Federal Reserve is strong among Republican voters and especially the followers of the tea party, a large group of activists who want to curb the power of government. Forty-one percent of Republicans and 55 percent of Tea Party supporters believe that the Fed should be abolished or radically changed.

Last Loser

James Galbraith, an economist at the University of Texas at Austin, said the one-term loser from the Fed would be the Congress that it would not be able to perform the central bank on such critical issues as growth and employment.

"To say that you should focus on inflation and unemployment is a bit strange," said Galbraith, who helped write the Humphrey-Hawkins Full Employment Act of 1978, which established the Fed's dual mandate to seek price stability and full employment. "This is a warning shot for a couple of senators who know very well that not going to get a bill entertaining."