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White House denounces Perry as Republicans target Fed

U.S. Republican presidential candidate Texas Governor Rick Perry walks to his bus after a campaign stop at D.C. Taylor Roofing in Cedar Rapi
U.S. Republican presidential candidate Texas Governor Rick Perry walks to his bus after a campaign stop at D.C. Taylor Roofing in Cedar Rapi

By Patricia Zengerle

WASHINGTON (Reuters) - The White House denounced Republican presidential candidate Rick Perry on Tuesday for his threatening remarks toward the head of the U.S. Federal Reserve that represented some of the most inflammatory rhetoric of the 2012 election campaign.

Campaigning in Iowa on Monday, the Texas governor said he would consider it "treasonous" if Fed Chairman Ben Bernanke "prints more money between now and the election" in November 2012 -- a fresh sign of the political heat the central bank faces as it tries to right the stumbling U.S. economy.

"If this guy prints more money between now and the election, I don't know what y'all will do to him in Iowa, but we would treat him pretty ugly down in Texas," Perry said to laughter from supporters in Iowa.

"Printing more money to play politics at this particular time in American history is almost treacherous, treasonous in my opinion," he said.

The White House responded by saying it is important for the Fed to remain independent, and jabbed back at Perry, who on Saturday entered the race for the Republican nomination to face Democratic President Barack Obama. Perry is already considered one of the strongest candidates for the Republican nomination.

"I certainly think threatening the Fed chairman is not a good idea," White House spokesman Jay Carney said.

"When you are president or running for president, you have to think about your words," Carney said in Iowa, where Obama was on a campaign-style bus tour.

Perry, who succeeded former President George W. Bush as Texas governor, is known for strongly conservative social and fiscal views. In his first three days as a candidate, he has upset Democrats by questioning Obama's patriotism and implying the U.S. military does not respect Obama as commander-in-chief. His remarks on Bernanke caused the biggest flap.

Another top-tier Republican presidential candidate, U.S. Representative Michele Bachmann, also criticized the Fed. "The Federal Reserve is not subject to transparency. The Federal Reserve has made terrible, grievous errors," Bachmann told reporters in South Carolina on Tuesday.

U.S. Representative Ron Paul, another Republican presidential candidate, also is a fierce critic of the Fed.

Bernanke was appointed in 2006 by Bush, a Republican, and reappointed by Obama. Under Bernanke, the Fed has embarked on one of the most extended periods of cheap money in U.S. history, keeping U.S. interest rates near zero since late 2008 and pledging to do so until mid-2013.

TARGETING THE FED

Perry, a favorite of the conservative Tea Party movement, may have been trying to tap into the anti-Fed sentiment of some of the most right-leaning Republican voters, who deeply distrust the unelected, but powerful, officials of the central bank.

The Fed has faced fire in Congress over its emergency financial rescues and regulatory lapses. Defenders argue the central bank was right to act aggressively to stem the crisis, and they credit it with preventing a financial collapse.

In fact, some argue that with no appetite among politicians for more fiscal stimulus, Fed action could be the only avenue left for Washington to support the U.S. economic recovery.

While investors chalked up Perry's comments to the campaign season, they said criticism of the Fed and threats to its political independence could multiply if the economy sours even more and the central bank takes further action to spur growth.

"Make no mistake, inflammatory comments like these are indicative of one thing -- an election cycle," said Keith Wirtz, the chief investment officer at Fifth Third Asset Management, with $18 billion in assets.

Financial markets increasingly expect the Fed to launch a third round of bond buying to provide liquidity if the economy continues to weaken.

"If correct, the noise will explode," Wirtz said.

The Fed has already conducted two such programs, known as quantitative easing, since the financial crisis. Critics say that such programs are equivalent to the Fed running the printing presses faster and can lead to a long-term reduction in the value of the dollar.

'NOT THE ANSWER'

Perry's campaign did not back away from his comments. Campaign spokesman Mark Miner said the Texas governor was expressing frustration with the economic situation and "out of control spending" in Washington.

"Most Americans would agree that printing and spending more money is not the answer to the economic issues facing the country," Miner said.

But his tone could turn off independent voters whose support will be needed to defeat Obama in the 2012 general election.

"When you say those things in the Lone Star State (Texas), you look colorful. When you say these things on a national stage ... it's going to come back and get you," said Ford O'Connell, an advisor on Republican John McCain's 2008 presidential campaign.

"You've got to be more like James Bond and less like Rambo," he said.

Democrats have seized on the latest remarks by Perry, who caused a stir in 2009 when he said Texas might need to secede from the United States, to make their case that he is a loose-talking cowboy likely to act too hastily under pressure if he were to win the White House.

At a campaign event on Monday, Perry was asked if Obama loved the country, and replied, "You need to ask him."

Asked whether Perry's remarks were disrespectful, Obama said he would "cut him some slack" as a new candidate.

"Everybody who runs for president, it probably takes them a little bit of time before they start realizing that this isn't like running for governor or running for senator or running for Congress, and you've got to be a little more careful about what you say," Obama said on CNN's "The Situation Room with Wolf Blitzer."

(Additional reporting by Alister Bull in Dyersville, Iowa, Harriet McLeod in Spartanburg, South Carolina, and Jennifer Ablan, Richard Leong and Steven C. Johnson in New York; Editing by Will Dunham)

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