Fed Chairman's Candor Takes San Juan's Congressman by Surprise

U.S. Rep John Campbell (R-Newport Beach) wrote in a post on his website Wednesday afternoon that he was surprised by Ben Bernanke's candor during an appearance on Capitol Hill earlier in the day.

Bernanke had confirmed the congressman's fears that interest rates will spike and people will lose confidence in the nation’s economy if Congress fails to take action to tackle its $1.5-trillion deficit.

“The Fed chairman is always very careful in his choice of language, as markets hang and react on the nuances of every word he says,” Campbell wrote on his website. Campbell represents San Juan Capistrano and other South Orange County communities.

“These are the strongest statements, I believe, that he has yet said publicly about the peril of our national debt,” he said.

Wednesday was the second day Bernanke appeared before the House Financial Services Committee.

"The markets are looking more at the political will and decision-making," Bernanke said. "An extended period of Congress ignoring or not making progress on these issues would be exactly the type of thing that would create disruption in our market."

Bernanke went on to explain that Congress' inaction would cause lenders to view the United States as a “credit risk,” force a spike in interest rates, slow the economy, create “financial stress” and compel people to expect higher taxes in the future.

"He has been saying our debt level is unsustainable, which is a euphemistic term that he and many others in Washington, D.C., have been using for some time, and this is [a problem that] can’t be fixed by monetary policy, but in fact that policy has to be changed by Congress and the president," Campbell told Frank Mottek, host of KNX 1070's Business Hour on Wednesday. "So my question is ‘What if we don’t?' "

To watch video of Campbell's exchange with Bernanke, click here. To listen to Campbell talk with Mottek, click here.