I found this exchange intriguing. First, the unflappable Bernanke looks stressed. I can’t put my finger on why, but the Congressional attacks seem to be getting to him. Second is the stunning lack of candor as to why the dollar swap lines were put in place, that there was massive dollar deleveraging happening. It would not be hard to paint a picture as to why letting that proceed without the Fed intervention could have had very bad consequences for US citizens. Or to say the offshore market for dollar based funding does affect US rates via arbitrage, that everyone including the Fed is now in an awkward position because markets have grown beyond national boundaries, but the market for dollar borrowing is now effectively global and involves a lot of non-US players. That would have been simpler and avoided what might be perceived as scare-mongering (even though that time was scary).
Instead, Bernanke basically stonewalls and refuses to offer reasonable explanations. Not sure if he is treating the Congress as stupid or not entitled to know, but he backs himself into a real whopper with his non-defense defense (see 2:55 to 3:20).
Update: I see from some of the comments that there might have been some misunderstanding or lack of clarity in my drafting. The Fed had nothing to hide here. The reason for implementing dollar swaps lines isn’t that hard to explain and were quite legitimate. Of all the things the Fed has done, this one is where there is nothing to be gained by not being forthcoming. Yet Bernanke’s answer was vague and he denied that the spike in the dollar had to do anything with the swap lines. Of course, teh causality runs the reverse way: the deleveraging led to very high demand for dollars, and the Fed was intervening to alleviate that, but saying the two had no relationship to each other is simply untrue.
It would have been tactically smart for Bernanke to be forthcoming on a line of questioning where he had nothing to lose.