Bernanke Reveals Plan to Tighten Credit

Ben Bernanke has begun outlining the Fed's strategy for reeling in stimulus money once the economy has recovered further, telling the House Financial Services Committee today that the Reserve will likely increase the interest rate it pays banks that deposit money with it. That would encourage banks to leave more money there, and increase the rate they charge consumers and businesses.

Bernanke said the tightening was still some months off, because the economy hadn't fully recovered. Paying interest on the reserves is a relatively new tool for the Fed, having been authorized by a 2008 law. Many foreign central banks rely on it. Bernanke didn't actually speak before the House committee, which canceled the hearing under the threat of a major snowstorm, but he released his statement in writing because of investor interest. (More Ben Bernanke stories.)