Sen. Charles Schumer gave Bernanke an even stronger nod, reminding everyone that his quick actions prevented a second Great Depression.
Most of the discussion centered around the bills pending in Congress to revamp the Federal Reserve. Bernanke strongly defended the Fed's role in banking supervision and repeatedly noted how important it was for the Fed to get the information on the ground from its supervisory role to make the appropriate monetary decisions. He pointed to how other Central Banks were getting even greater power over banking supervision in other countries, not losing it.
Bernanke also told senators that it was time to "unwind TARP." He expects that most of the money given to the financial institutions during the TARP bailout will be paid back. In fact he expects TARP to be a break even proposition from the prospective of financial institutions.
Rules and Regulations
He also pushed for new regulations to deal with "too big to fail" institutions. He thinks that there must be a plan to let these institutions fail without destabilizing the entire financial system. He said creditors must understand they will face monetary losses, as well counterparties and shareholders. He never wants to see a bailout the size of AIG again. He thinks the FDIC model for handling smaller banks is appropriate and that the FDIC should be the lead institution with imput from the Treasury Department on the political fallout of any plan.
Discussion then turned to whether the Fed has a role in popping asset-price bubbles. While he stressed that financial regulation is his preferred approach, Bernanke did say during testimony, "I do not rule out using monetary policy if necessary, if that situation does become worrisome and threatening."
Bernanke expressed great concern about legislation that would put the Fed on a tighter leash and let Congress "second-guess" its decisions. His chief concern was a proposal by Rep. Ron Paul of Texas to "audit the Fed." This amendment to the House version of financial regulation overhaul regulation would require the Fed to submit to audits of its decisions concerning monetary policy. Bernanke told the Senate committee, "To be very, very clear, I in no way object to -- in fact I welcome -- transparency about the Fed's activities and the Fed's financial position, both to the public and to the Congress. I am, however, concerned with the auditing of monetary policy."
Bernanke took the position of Federal Reserve Chairman insisting that he wanted the Fed to be more transparent in its decision making, but many think he has not succeeded with this goal, especially as trillions of dollars have secretly been used to stimulate the economy with the Fed refusing to do any type of public reporting of where the money went.
Critics May Block
Vermont Senator Bernie Sanders placed a hold on the nomination of Ben Bernanke for a second term as chairman of the Federal Reserve. That means Democratic leaders will need to find at least 60 votes to get the confirmation of Ben Bernanke to the floor of the Senate. In placing the hold, Sanders said, "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. What the American people did not bargain for was another four years for one of the key architects of the Bush economy."
He continue to state in a press release that, "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."
Bernanke will not be the first Federal Reserve Chairman to face opposition, but he must get more than 84 votes in favor or less than 16 votes in opposition to avoid having the worst record in a Senate confirmation vote. Right now former Chairman Federal Reserve Paul Volcker holds that record. He was confirmed with a vote of 84 to 16.
Lita Epstein has written more than 25 books, including Reading Financial Reports for Dummies and The Complete Idiot's Guide to the Federal Reserve.