Idaho Congressman Simpson participated in a House Budget Committee hearing today where Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve System, testified about the federal government’s response to the financial crisis facing our nation. Simpson expressed his concern about the government’s decision to use $250 billion to purchase senior preferred shares in U.S. banks and asked Chairman Bernanke to clarify how this program is in the taxpayer’s best interest. 

Last week the Department of Treasury announced a new Capital Purchase Program under which the government will use a portion of the money provided under the recently-passed economic rescue package to inject equity into U.S. banks in order to stimulate new loans.  Nine major U.S. banks have already agreed to participate. Simpson asked Bernanke how the Treasury Department and the Federal Reserve would ensure that banks would use the $250 billion to make new loans and thaw the credit market instead of simply padding their own books or using the money to buy out smaller financial institutions.

“I’ve spoken to homebuilders, realtors, auto dealers, and bankers in Idaho who all say that if this program is not done right, we risk putting ourselves in another bad situation,” said Simpson.

Bernanke also spoke about the important role that Congress’s response to the crisis has already played in helping to avoid a severe and crippling recession that would leave many Americans without work. 

“I am committed to protecting the economic security of retirees, families, and small business owners in Idaho,” Simpson said. “In that endeavor, Congress has an important oversight responsibility to make sure that our investment in our nation’s economic security pays dividends for hard-working taxpayers. I am carefully scrutinizing Treasury’s recent decision, and I will continue pursuing clear answers to the questions my constituents and I have about this new program.”