Sanders's hold on Bernanke shows rising public concern about the Fed

WASHINGTON, December 2 ? Sen. Bernie Sanders (I-Vt.) today placed a hold on the nomination of Ben Bernanke for a second term as chairman of the Federal Reserve.

"The American people overwhelmingly voted last year for a change in our national priorities to put the interests of ordinary people ahead of the greed of Wall Street and the wealthy few," Sanders said. "What the American people did not bargain for was another four years for one of the key architects of the Bush economy."

Release: Sanders Puts Hold on Bernanke ? Newsroom: U.S. Senator Bernie Sanders (Vermont)

Bernie Sanders, as he did earlier in the year with the nomination of Gary Gensler of the CFTC, is placing a hold on the re-nomination of Ben Bernanke to the chairmanship of the Fed. I wonder sometimes if Bernie is the only Senator who is actually worrying about who is running our key financial institutions.

The problem with the Fed is that almost nobody outside the financial community understands how it works, and as a result the popular outrage over its behavior is not nearly at the level it should be. The Greenspan legacy of providing a sort of permanent, built-in backstop for Wall Street by continually loosening the money supply every time the financial services sector blows itself up in this or that idiotic speculative craze is something that should make every citizen muy enojado. Now it's even worse ? direct bailouts of companies and billions in discount window lending coupled with zero transparency, zero taxpayer access to the Fed's books.

Bernanke doesn't bear as much responsibility for the financial crisis as Greenspan, but his policies have certainly been in many ways a continuation of the the Greenspan era, which combined an extreme soft-touch regulatory posture (to put it mildly; it might be more accurate to say that the Fed hasn't had a regulatory record for the last decade or so) with a Dionysan, drink-and-be-merry, fully enabling attitude toward the risk-taking crowd on Wall Street.

The Sanders release summed up Bernanke's record:

As head of the central bank since 2006, Bernanke could have demanded that Wall Street provide adequate credit to small and medium-sized businesses to create decent-paying jobs in a productive economy, but he did not.

He could have insisted that large bailed-out banks end the usurious practice of charging interest rates of 30 percent or more on credit cards, but he did not.

He could have broken up too-big-to-fail financial institutions that took Federal Reserve assistance, but he did not.

He could have revealed which banks took more than $2 trillion in taxpayer-backed secret loans, but he did not. Incidentally, Los Angeles congressman Brad Sherman got an excellent measure passed a few weeks back reworking section 13 (3) of the Federal Reserve Act, which until now had given the Fed basically unlimited power to directly lend money to private bodies in "unusual and exigent circumstances." Sherman's achievement was to get a cap placed on the amount of money the Fed can lend out under 13(3) at $4 trillion. That it took a fairly Herculean negotiation in committee to get even that high a cap passed tells you how much juice the financial services sector has on the Hill.

Earlier in the summer, Sherman had asked Bernanke if he would accept a $12 trillion cap, and Bernanke had sort of laughed off the question. Like his predecessor, who got off on stiffing inquiries by congress via opaque utterances and oracular pronouncements, Bernanke is already developing a reputation for being something of a narcissistic tool who enjoys having the world hang on his every word. Another reason to ditch him: it's impossible to see how the Obama administration and the Democrats can have any legitimacy in claiming distance from the Bush bailout policies if Bernanke is allowed to stay.

Anyway, it'll be interesting to see just how much opposition there will be to a second Bernanke term. I'm guessing not much, not this time. But it does seem that popular interest in what the Fed actually does is on the rise, and eventually people are going to demand a different sort of person in that seat.

"It's the sweetheart deal of the century, putting generations of working-stiff taxpayers on the hook to pay off Bob Rubin's fuck-up-rich tenure at Citi." Actually, the U.S. structural deficit and resultant national debt is mainly a hangover from the Bush Administration, with economic remedies to the financial crisis and the recession making a relatively small piece of the pie. Obama will be rolling back most of Bush's tax cuts for the wealthy, but Taibbi deigns not to mention that.

I have no idea what he's talking about here. I was referring specifically to the Citigroup bailout, which was indeed a sweetheart deal and does indeed put working-stiff taxpayers on the hook to pay for Bob Rubin's fuckups. Not generally speaking, not metaphorically speaking, but literally. Rubin encouraged Citi to leverage up to invest in subprime crap; it blew up; we're paying for it. I'm not sure what the factual issue is here.

Lastly, there's this bit about the "resolution authority" part of Frank's regulatory reform bill:

"Even more outrageous, it specifically prohibited Congress from rejecting tax giveaways to Wall Street, as it did last year, by removing all congressional oversight of future bailouts." The legislation actually only allows federal regulators to use funds taxed from banks to assist them in a crisis; if they want to use taxpayer money, Congress can say no.





Update fact-checking the Prospect fact-check