Senators took aim Thursday at Federal Reserve Chairman Ben Bernanke, linking him to rising unemployment, regulatory lapses that led to the financial crisis and the corporate bailouts that followed.
And some warned that the Fed's record-low interest rates could feed a new speculative bubble.
Bernanke remained stoic during the roughly five-hour hearing by the Senate Banking Committee, which is weighing his nomination to a second four-year term. He acknowledged some mistakes but defended his record, saying that without the Fed's bold action, the crisis would have been "markedly worse."
And by day's end, despite the verbal swipes and a move by one senator to block Bernanke's nomination, his confirmation didn't appear in doubt.
Some senators credited Bernanke with helping keep the Great Recession from becoming a second Great Depression.
Sen. Christopher Dodd, chairman of the panel, predicted Bernanke would win confirmation.
"Under your leadership, the Fed has taken extraordinary actions to right the economy," said Dodd. "These efforts played, in my view, a very significant role in arresting the financial crisis."
Nonetheless, Dodd wants to strip the Fed of some of its powers, including overseeing banks because regulators failed to crack down on dubious mortgages and other problems that figured prominently in the financial crisis.
Dodd and others drew a distinction between Bernanke's economic leadership and the operations of the Fed as an institution itself.
If confirmed to another term, Bernanke vowed to work with Congress to overhaul the nation's financial regulatory structure and to bring about stronger and more effective supervision.
"It would be a tragedy if, after all the hardships that Americans have endured during the past two years, our nation failed to take the steps necessary to prevent a recurrence of a crisis of the magnitude we have recently confronted," Bernanke told the panel.
Efforts already have begun at the Fed to tighten oversight of banks and other financial firms. And the central bank is actively engaged in identifying and implementing improvements, Bernanke said.
"A financial crisis of the severity we have experienced must prompt financial institutions and regulators alike to undertake unsparing self-assessment of their past performance," the Fed chief said.
Bernanke, 55, has taken heat for failing to detect early signs of the housing collapse. Lax regulatory oversight by the Fed and others was blamed for contributing to the crisis.
"The Fed has done a horrible job as a regulator," said the committee's top Republican, Sen. Richard Shelby of Alabama.
"We didn't do a perfect job by any means," Bernanke acknowledged. But he added: "We didn't do the worst job" either.
Bernanke acknowledged that lapses were made.
"I did not anticipate a crisis of this magnitude, this severity," Bernanke said. Many banks weren't adequately prepared and lacked sufficient capital buffers against losses. "That is a mistake we won't make again."
At the same time, Bernanke argued that the Fed must remain "effective and independent" to make decisions that may be good for the economy but unpopular with politicians or the public. That was directed at a provision passed by a House committee on Wednesday that would subject the notoriously secretive Fed to congressional audits. Bernanke fears that could interfere with crucial decisions about interest rates.
Bernanke said the Fed stands ready when the time is right to reverse course and start boosting interest rates to prevent inflation from flaring up. As part of that process, the Fed would need to soak up an unprecedented amount of money trillions of dollars it poured into the economy during the crisis.
"We are confident that we have the necessary tools to do so," Bernanke said. He didn't say when the Fed would start raising rates, although private economists think that will happen late next year.
The central bank's forceful and aggressive actions prevented the devastating crisis from getting even worse, Bernanke said.
Drawing on lessons learned as a scholar of the Great Depression, Bernanke rolled out a slew of bold and unprecedented programs to help ease credit clogs and spur lending. He coordinated emergency relief actions with central banks overseas. He slashed a key lending rate to a record low near zero.
Those steps along with a $787 billion stimulus package eventually helped pull the country out of recession. The economy has now entered a fragile recovery.
Even so, it probably won't be strong enough to stop the unemployment rate now at a 26-year high of 10.2 percent from rising into 2010, Fed officials and private economists say. And that poses a threat to lawmakers in next year's congressional elections.
Bernanke said it is too early to decide whether additional government aid is needed to bolster the recovery and spur job creation. The White House was holding a summit Thursday to explore new ideas to get Americans back to work.
Some senators and others also worry that the Fed's super-low rates could feed a new speculative bubble.
Bernanke told lawmakers he didn't see any bubbles at this point in the U.S. He also said it is not the United States' "responsibility" to prevent speculative bubbles in other parts of the world.
Regulation would be the first line of defense against bubbles forming, said Bernanke, who didn't rule out using higher interest rates to pop them. The Fed is keeping watch, monitoring major credit and stock markets to look for "misalignments," he said.
The biggest sore point with the public and their representatives was the government's bailout of Wall Street, even as ordinary Americans suffered. The multibillion-dollar bailouts of American International Group Inc. and other financial firms that continued to hand out huge bonuses sparked fury. They also fueled worries that the Fed's moves would encourage further reckless bets by companies.
"You are the definition of a moral hazard," huffed Sen. Jim Bunning, R-Ky., the only senator who opposed Bernanke's confirmation four years ago and said he'll do so again.
"The AIG bailout alone is reason enough to send you back to Princeton" where the Fed chief taught economics for 17 years, Bunning said. "Your time as Fed chairman has been a failure." Bunning vowed to "do everything I can to stop your nomination and drag out this process as long as I can."
In response to the bailouts, some lawmakers not only want to rein in the Fed, as Dodd would do, but also subject it to deeper scrutiny.
Sen. Bernie Sanders, an independent from Vermont, said he's so upset about the bailouts he plans to try to block Bernanke's nomination by putting a "hold" on it when it reaches the Senate floor. Essentially that means the Senate would need 60 votes to approve the nomination, rather than a simple majority. That could slow the approval process but is unlikely to derail it.
Treasury Secretary Timothy Geithner, in an interview on CNBC Thursday, said: "We're confident he'll be confirmed."
Geithner, who was chief of the Federal Reserve Bank of New York before taking the Treasury job, credited Bernanke with "enormous creativity and bravery" in confronting the financial crisis. "We're lucky to have him in the job," Geithner said.