When the U.S. economy melted down on former President Bush’s watch, it was a sobering moment.
Unfortunately, Ben Bernanke was not willing to sober up.
Instead of rejecting the fantasy that any financial institution could or should be imagined as “too big to fail,” the chairman of the Federal Reserve determined that behemoth banks needed massive infusions of federal money so that they could grow even bigger.
Working with the Bush economic team that had rewarded the wealthiest Americans with tax cuts, traded away whole American industries and encourage speculation that would make a blackjack dealer wince, Bernanke’s steered trillions of dollars in what were essentially free-money loans and other taxpayer-funded benefits to the flabbiest financial institutions in the world.
And if there was any doubt about where the Fed chair stood in the struggle between Wall Street and Main Street, Bernanke refused to reveal to American citizens or their elected representatives the names of the billionaire boys clubs that pocketed this welfare for the rich.
Bernanke was, and is, the face of everything that is wrong with the crony-capitalism model of “regulation” developed by the Fed under its previous chair, Ayn Rand acolyte Alan Greenspan.
President Barack Obama, who was elected on a promise to “change” the way Washington and Wall Street did business, instead hired Fed insiders like Tim Geithner as his economic aides and then nominated Bernanke to serve a second term as Fed chair.
The president’s decision was ill-thought in the extreme.
Luckily, presidents are not kings. They can be checked and balanced by the Congress.
And Vermont Senator Bernie Sanders, the only independent members of Congress, has done just that.
On Wednesday, Sanders took advantage of the arcane rules of the Senate — which allow individual members to delay confirmation of a presidential selection — placed a hold on the Bernanke nomination.
Sanders acted for exactly the right reason.
“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 explained. “What the American people did not bargain for was another four years for one of the key architects of the Bush economy.”
In particular, on the eves of the White House jobs summit, Sanders is focusing on the Bernanke’s failure to demand that Wall Street provide adequate credit to small and medium-sized businesses so that they can retain current workers and create new family-supporting jobs.
“The American people want a new direction on Wall Street and at the Fed,” says Sanders. “They do not want as chairman someone who has been part of the problem and who has been responsible for many of the enormous difficulties that we are now experiencing. It’s time for a change at the Fed.”
Sanders is serious.
Though the Senate could ultimately reject his hold, the move by Sanders has the potential to delay the confirmation process when — after committee hearings on the Bernanke nomination, which began Thursday — it moves to the full Senate. At least 60 senators would have to vote to consider the nomination before a vote could be scheduled.
But Sanders is not merely interested in delay the process.
He is calling on Obama to withdraw the Bernanke nomination and propose someone else as the next head of the Fed.
And he is making a case is blunt, specific detail, as a statement released by his office reveals:
The Federal Reserve has four main responsibilities: to conduct monetary policy in a way that leads to maximum employment and stable prices; to maintain the safety and soundness of financial institutions; to contain systemic risk in financial markets; and to protect consumers against deceptive and unfair financial products.
Since Bernanke took over as Fed chairman in 2006, unemployment has more than doubled and, today, 17.5 percent of the American workforce is either unemployed or underemployed.
Not since the Great Depression has the financial system been as unsafe, unsound, and unstable as it has been during Mr. Bernanke’s tenure. More than 120 banks have failed since he became chairman.
Under Bernanke’s watch, the value of risky derivatives held at our nation’s top commercial banks grew from $110 trillion to more than $290 trillion, 95 percent of which are concentrated in just five financial institutions.
Bernanke failed to prevent banks from issuing deceptive and unfair financial products to consumers. Under his leadership, mortgage lenders were allowed to issue predatory loans they knew consumers could not afford to repay. This risky practice was allowed to continue long after the FBI warned in 2004 of an “epidemic” in mortgage fraud.
After the financial crisis hit, Bernanke’s response was to provide trillions of dollars in virtually zero-interest loans and other taxpayer assistance to some of the largest financial institutions in the world. Adding insult to injury, Bernanke refused to tell the American people the names of the institutions that received this handout or the terms involved.
“Mr. Bernanke has failed at all four core responsibilities of the Federal Reserve,” Sanders concluded. “It’s time for him to go.”
Barack Obama was wrong to nominate Ben Bernanke for a new term.
Bernie Sanders is right to use his constitutionally-defined authority check and balance the excesses of the executive branch. And his fellow senators should support his demand that the president abandon Bernanke and the economic madness that he represents.
Who says? A remarkable left-right coalition that on Wednesday wrote to members of the Senate saying:
In the last two years, the Federal Reserve Board has lent several trillion dollars to banks and other private companies, financial and non-financial institutions through a series of special lending facilities. The total amount of loans made through facilities exceeds the annual budget of the United States. In addition, it guaranteed trillions of dollars of various assets and also made hundreds of billions of dollars available to several foreign central banks through currency swap arrangements.
At this point, neither the public nor members of Congress has any information about who benefited from these loans, guarantees, and swap arrangements. There is no information available on the specific terms of the loans – the interest rate charged, the collateral posted, and whether or not they were repaid. There is no information available on how it was decided who would qualify for the Fed’s help and who would be denied assistance.
Almost three quarters of the members of the House of Representatives have co-sponsored a bill calling for an audit of the Federal Reserve Board. This audit will allow Congress to assess how the Fed, under the leadership of its chairman Ben Bernanke, performed in this crisis and whether it acted appropriately in its disbursement of an enormous amount of money and guarantees.
Without this audit, Congress lacks the information it needs to evaluate Mr. Bernanke’s performance. Therefore the Senate should delay action on Mr. Bernanke’s reappointment until an audit of the Fed’s books takes place, the results are made available to the Congress and Mr. Bernanke answers a serious inquiry into the actions he took.
Signers of the letter supporting the move by Sanders include:
Ryan Alexander, president, Taxpayers for Common Sense
Chris Bowers, founder, OpenLeft
Dean Baker, co-director, Center for Economic and Policy Research
Robert Borosage, co-director, Campaign for America’s Future
Danielle Brian, executive director, Project On Government Oversight
Mark Calabria, director of financial regulation studies, Cato Institute
Mark Cohen, executive director, Government Accountability Project
Tom DeWeese, president, American Policy Center
Tyler Durden, founder, Zero Hedge
Sandra Fabry, executive director, Center for Fiscal Accountability
James Kenneth Galbraith, economist
Adam Green, co-founder, Progressive Change Campaign Committee
George Goehl, executive director, National People’s Action
Jane Hamsher, founder, FireDogLake
Gary Kalman, Washington director, Public Interest Research Group
Matt Kibbe, president, FreedomWorks
Grover Norquist, president, Americans for Tax Reform
Duane Parde, president, National Taxpayers Union
Aaron Swartz, co-founder, Progressive Change Campaign Committee
Phyllis Schlafly, president, Eagle Forum
John Tate, president, Campaign for Liberty
John Taylor, CEO, National Community Reinvestment Coalition
Stephanie Taylor, co-founder, Progressive Change Campaign Committee
Robert Weissman, president, Public Citizen
John Whitehead, president, The Rutherford Institute