Bernanke sees good reasons for Fed to keep large balance sheet

(RECAP: The Federal Reserve has long said it intends to shrink its balance sheet once the economy had gotten back on its feet from the financial crisis. But former Fed Chairman Ben Bernanke now thinks this nostalgia for the past might be a mistake. Bernanke said he came away from the Fed’s summer retreat in Jackson Hole convinced by experts that keeping a larger balance sheet, on balance, might be a smart thing to do. Bernanke said the large balance sheet could be a tool for enhancing financial stability. Facing stricter regulations, banks have a need for safe, liquid, assets. Instead of having the private market try to jerry-rig such assets, the Fed could offer its securities holdings to financial market participants when needed through reverse-repurchase agreements.)