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Bernanke Did Help Get Us Into This Mess
Give the Washington Post credit, in its article on Ben Bernanke's reappointment as Fed chair, it did point out that Mr. Bernanke bears considerably blame for getting us into this economic crisis in the first place. While all the other reporting emphasized his efforts to prevent a financial collapse over the last year, only the Post noted that Bernanke consistently ignored the risks building up as a result of the growth of the housing bubble.
While Bernanke bears less responsibility than Greenspan, he was a Fed governor from 2002 to 2006, and then head of President Bush' Council of Economic Advisors, until he took over as Fed chairman in January of 2006. There were few people better positioned than Bernanke to head off the growth of the housing bubble.
None of the reporting mentioned the secrecy surrounding the Fed's lending policies. Bernanke has refused to make any information public about who has received loans under the various spending lending facilities created by the Fed over the last two years, or under what terms. This is the topic of a lawsuit by Bloomberg, which the Fed lost yesterday in district court. This secrecy has also been a big factor motivating most members of the House to sponsor a bill calling for a GAO audit of the Fed.
It would have been appropriate to mention this issue in a discussion of the case for Bernanke's reappointment.
--Dean Baker
COMMENTS (11)
Most (as in more than half) the members of the House of Representatives are sponsoring a bill to audit the fed? It's not that they plan to vote for it; they are actually all sponsoring it? That doesn't sound right.
Posted by: Erik L | August 25, 2009 7:24 AM
http://www.govtrack.us/congress/bill.xpd?bill=h111-1207
1 sponsor + 282 cosponsors / 435 representatives = 65%
Posted by: John Duncan | August 25, 2009 8:19 AM
Erik L wrote, It's not that they plan to vote for it; they are actually all sponsoring it? That doesn't sound right.
ISTR that it's not uncommon for that kind of thing (massive cosponsorship) to happen.
Posted by: liberal | August 25, 2009 8:29 AM
Bernanke never saw the credit collapse coming. Yet somehow, he is just the guy the elites want to guide them out of it.
When you reach a certain strata of human society, you can't screw up enough. Once promoted, appointed, elected or selected, all you need to do is fog a mirror, the facts be damned!
Posted by: some guy in a cube | August 25, 2009 9:19 AM
Yes he did and that's an important consideration. His actions contributed to bank actions that have drastically limited our economic paths for decades. And his only response to the mess they created is to throw money at them (no strings attached).
I can't name one action he did to prevent the mess we're in or one thing he's done to resolve it that any high school kid with unlimited resources couldn't have done, not one.
So, remind me, why should BB be reappointed?
And, what exactly has President Obama done to make us who voted for him proud?
Posted by: bailey | August 25, 2009 10:15 AM
Actually he raised interest rates just before the collapse. I think he was trying to slow credit which may actually have somewhat expedited the economic collapse. However, after the Greenspan years no one could have wound that clock back when he took the reigns.
I'm not a big fan, but he did actually try to take the punch bowl away. After the collapse he of course cut interest rates to zero.
I didn't read many critiques of that policy, but it seems there must be diminishing returns as you approach 1% interest rates. Cutting the rate as he did, just pinned him in with no room to maneuver. He should have kept some of his powder dry.
Posted by: scott | August 25, 2009 11:10 AM
I keep hearing his specialty was the Great Depression. Wasn't he more of an inflation specialist?
Also he argued that what might have been the biggest problem was the money glut, Asian money pouring into the U.S. encouraging risky investment, more of a factor than the housing bubble. Though the housing was the most toxic.
Posted by: craig | August 25, 2009 3:45 PM
I think Americans are tired of these faux heroes being foisted upon us after two decades of declining wages and leisure time. We were all told that Greenspan was the 'Maestro' once upon a time, as well.
Posted by: purple | August 25, 2009 5:16 PM
Nice post, Dean!
Posted by: Aditya Savara | August 26, 2009 5:00 AM
Just more of the SAME from Obama. If you examine all the contentious issues left behind by Bush, (rendition, Guantanamo, wireless wiretaps, Robert Gates, Afghan war, Iraq, Economic "Team" of Goldman Sachs former employees) and now SAME with Bernanke, you have to laugh. That CHANGE mantra was really a big joke on the American people... right?
Posted by: kc | August 26, 2009 3:15 PM
kc, to this point, i agree - a bad joke with horrific consequences for our kids & grandkids.
Posted by: bailey | August 27, 2009 8:56 AM