Ben Bernanke Mired In Political Maze as the Zero Hour of Fed Nomination Looms
by Hiland Doolittle
The Federal Reserve relies upon political independence to perform its duties as banker for the U.S. government. Accordingly, there is often tension between Congress and The Fed. In tough economic times, the tension boils over and a fair amount of finger pointing takes on political tones.
Ben Bernanke, the Federal Reserve Chairman, is the most recent recipient of that political finger pointing. The Chairman’s appointment expires on January 31st and unless the political logjam clears, Bernanke will be out of a job come Monday morning.
At issue is the Federal Reserve’s role in the recession and specifically in the AIG debacle. While politicians scramble to fault Bernanke, they are slow to see or verbalize the errors of their ways. Bernanke succeeded Hank Paulsen and was handed the unenviable task of cleaning up the mess created by lax financial regulation which was accepted and permitted by Congress.
The Fed’s Transparency Issue
Bernanke is a staunch advocate of the Federal Reserve’s longstanding policy of independence from the political environment. There is much Congressional support for increased transparency and for fundamental changes to the central bank’s authority.
The idea of broader oversight and increased audit powers is said to have 300 supporters in the House alone. The congressmen point to the expanded role the Fed played in recent recovery efforts. In the Senate, Vermont Senator Bernie Sanders has 31 supporters for a proposed “audit-the-Fed” bill.
In a Tuesday meeting with Majority Whip Dick Durbin of Illinois, Bernanke agreed that more transparency was needed but maintained the central bank’s need for independence from political influence was an absolute necessity.
Confirmation in Filibuster
The Bernanke nomination is mired in a Senate filibuster. The process to end a filibuster is termed cloture. To end the logjam, 60 votes are required in favor of cloture. A vote for cloture is not a vote for Bernanke. With the Sunday deadline looming, Senator Durbin reported that several senators opposing Bernanke had agreed to cast votes for cloture.
Once the nomination goes to vote, those senators may vote any way they choose. However, Bernanke only needs 51 votes to be confirmed. In the event of a 50-50 stalemate, Vice President Joe Biden would cast the deciding vote.
While it is likely that Bernanke will be confirmed, the resistance has led to speculation that the Federal Reserve will undergo massive changes in the very short-term. Among those changes will be Congressional oversight.
AIG and The Fed
Senator Jim Bunning of Kentucky is a vocal opponent of the Bernanke confirmation. At the core of the nomination controversy are politics and the role the Federal Reserve played in the AIG bailout. Republicans have been investigating Bernanke’s role and specifically his motivation in overruling aide’s recommendations that the central bank not become involved with the troubled company.
The House Oversight and Government Reform Committee has received documents from a whistleblower who as implied some wrongdoing. On the other hand, Senator Chris Dodd, Chairman of the Banking Committee, supported Bernanke saying, “He’s done a very good job in the last year. And, but for his work, we would be in a very different position in this country today…. our entire financial system might have collapsed but for his leadership.”
At the Federal Reserve, board members have expressed their fears that congress is using the Bernanke nomination to gain a foothold at the central bank to enable the printing of more money, a position adverse to Bernanke’s firm position. A key role of the central bank is the oversight of inflation. Another run of money will have a dramatic effect on the inflation rate.
Money for Bailouts not Employment
Wall Street and financial institutions are unified in support of the beleaguered Chairman. Congress is facing the wrath of the voters who are questioning where their tax money is and why it was not directed at reducing unemployment.
The perception is that under Bernanke’s leadership The Federal Reserve used taxpayer money to bailout irresponsible investment practices while life on Main Street continues to deteriorate. Bernanke, Treasury Secretary Geithner and FDIC Chair Sheila Bair have all lobbied for more stringent regulation of the financial system but resist politicizing of their institutions. Therein, lies the rub.
Tags: aig, Bailout, ben bernanke, bob bernanke, Federal Reserve, unemployment
About the Author - Hiland Doolittle
Hiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses.
Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.
