Fed chairman Bernanke confirmed for second term

The Senate voted to confirm Ben Bernanke as chairman of the Federal Reserve today, but it was hardly a ringing endorsement:

The 70 to 30 vote was the thinnest approval ever extended to a chairman in the central bank’s 96-year history.

The confirmation was a victory for President Obama, who had called Mr. Bernanke an architect of the recovery, but also signaled the extent to which the Fed, once little known to the public, has become the object of populist outrage over high unemployment and Wall Street bailouts.

In several hours of debate, senators said the Fed had abetted, then ignored, the housing and credit bubbles and allowed banks to keep dangerously low capital reserves and to make reckless lending decisions that ruined consumers. Some even blamed Mr. Bernanke for the falling dollar and questioned his commitment to free enterprise.

In contrast, Mr. Bernanke’s supporters were muted. Like a mantra, they said that the Fed had made mistakes but that Mr. Bernanke had helped save the economy from a far worse recession.

Eleven Democrats, 18 Republicans and independent Bernie Sanders voted against confirming Bernanke (roll call here).

Senators of both parties who opposed Bernanke said his monetary policy and poor oversight contributed to the financial meltdown of 2008. Various Democrats who voted against Bernanke said he had been too beholden to Wall Street interests.

I still think it was a mistake for Obama to nominate Bernanke for another term, but let’s hope the Fed chairman our mild-mannered economic overlord improves on the job.

UPDATE: MIT economist Simon Johnson argues that Bernanke’s reappointment was “a colossal failure of governance.” Worth a read.

SECOND UPDATE: Bleeding Heartland user ragbrai08 notes that seven senators voted for cloture (allowing the Senate to proceed to consider Bernanke’s nomination) before voting against confirming him. Here is the roll call on the cloture vote. The senators who voted for cloture but against Bernanke are Democrats Tom Harkin, Barbara Boxer (CA), Byron Dorgan (ND), Al Franken (MN), Ted Kaufman (DE), and Sheldon Whitehouse (RI), along with Republican George LeMieux (FL).

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Grassley to vote no on Bernanke

Senator Chuck Grassley said today he will vote against giving Ben Bernanke another term as chairman of the Federal Reserve. According to the Des Moines Register,

“I’ll vote no because of concerns of inflation and a pattern of resistance to accountability,” Grassley said. […]

Grassley dismissed the argument that defeating Bernanke would throw the financial markets off course. […]

“The Fed takes action once a month that affects the stock market,” Grassley added. “And we’re still going to have a Fed chairman. So, what’s the big deal?”

I find it odd that Grassley is concerned primarily about inflation in the current economic environment, and as Bleeding Heartland user PrairieBreezeCheese pointed out, even 1970s-like inflation is very different from the “hyper-inflation” Grassley warned about yesterday. Senator Jeff Merkley of Oregon, the only Democrat on the Senate Banking Committee to vote against confirming Bernanke last month, has laid out a stronger case against giving him another term. I am also in rare agreement with Republican Senator Jim Bunning of Kentucky, who has called for all senators to have a chance to review some unpublished Federal Reserve documents before voting on Bernanke’s nomination.

I’ve seen many different “whip counts” on Bernanke. It appears he will have little trouble gaining the support of at least 50 senators, and I doubt his nomination will be filibustered, because some Democrats who plan to vote against confirming him will vote for cloture.

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Harkin will vote no on Bernanke

Senator Tom Harkin told the Des Moines Register and Radio Iowa today that he will vote against confirming Ben Bernanke to another term as chairman of the Federal Reserve. Radio Iowa quoted him as saying he’s “tired of being held hostage by Wall Street”:

“I just think Mr. Bernanke is going to continue the policy of The Fed of taking care of the big financial institutions and to heck with Main Street,” Harkin says.

Harkin faults Bernanke for the handling of the Wall Street bailout. “Mr. Bernanke gave away trillions of dollars of taxpayers’ money to AIG at almost zero percent interest rate, and then they turned around and they held their counterparties – French, Germans, Swiss and many others – harmless. They didn’t have to take a hair cut at all,” Harkin says, “They got paid off in full and yet we (taxpayers) lost trillions.” […]

“I’ve had it with being told that some bank is too big to fail and I’ve had it with being told that someone, some person is so important that we have to have that person in this position.  That’s nonsense,” Harkin says.

Looks like someone didn’t get the memo about “our mild-mannered economic overlord” saving the country. Good for Harkin.

Meanwhile, Senator Chuck Grassley told the Des Moines Register, “I think I made a decision [on Bernanke] […] But I don’t think I’ll announce it.” Grassley went on to criticize the Fed for doing too little to fight inflation, suggesting we could be on a path to hyper-inflation like we had in 1979.

With unemployment at a 26-year high, I’m surprised Grassley is so concerned about hyper-inflation. Economists, correct me if I’m wrong, but isn’t deflation a greater risk right now?

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