OK, maybe not. But it is a fact that the 30 votes in opposition that Bernanke received for his confirmation to a second term represents the most no votes for a Federal Reserve chairman in the history of the body, spanning almost 100 years.
Barney Frank doesn’t think Bernanke has a credibility problem. “Once you’re in, you’re in,” he said. But the level of opposition to Bernanke reflects a continuing upset in the public and even in Congress, not just with the people running the economy, but with institutions like the Federal Reserve system. The fact that this is not enough to stop establishment forces from winning Bernanke’s confirmation is troubling, particularly for what it means about the economy and governance in this country. In his statement on the confirmation, Dean Baker amplifies this point:
The Senate approval of a second term for Ben Bernanke as Fed chairman sends exactly the wrong message to the Federal Reserve Board and the country. First and foremost, Mr. Bernanke failed in his job about as spectacularly as is humanly possible. He sat back and watched the housing bubble grow to a level where its collapse jeopardized the stability of the U.S. economy.
The financial crisis and the economic downturn of the last two years were entirely predictable outcomes of this collapse. Yet, Mr. Bernanke insisted that there was no problem with the housing market, first in his capacity as a governor of the Federal Reserve Board since 2002 and then in his capacity as chairman since January of 2006.
Attacking the bubble would have been politically difficult since it required going after a source of enormous profit for the financial industry. Nonetheless, a responsible Fed chair would have used all of the Fed’s tools and power to prevent the bubble from expanding to such dangerous levels, even knowing that he would face fierce opposition from the financial industry.
Bernanke opted not to go this route, and tens of millions of people are now facing the consequences in the form of unemployment, foreclosures and/or lost savings. If he can get reappointed in spite of this lapse in responsibility, it is difficult to see why any future Fed chair would ever confront the financial industry under similar circumstances.
Nevertheless, it is good to see at least some Senators, even those who voted for Bernanke, want to challenge him on his future efforts at the Fed. Jeff Merkley, who led the opposition, asked that Bernanke “take a new tack” and fulfill his maximum employment mandate as much as he fulfills the price stability mandate. As Merkley said in his statement on the confirmation, “For far too long, the economic success of our nation has been measured by the ups and downs of Wall Street, even as the wages of the average worker stagnated and families fell deeper in debt.”
Sherrod Brown, who actually voted for Bernanke, had a similar message.
The Federal Reserve’s mission is to promote employment and provide our economy with stable prices and a sound banking system. In my conversations with Chairman Bernanke, I have expressed my disappointment that the Fed in the past has treated Wall Street with kid gloves at the expense of working families and small businesses.
The Fed was too slow to protect people from predatory lenders and credit card excess. And taxpayers will bear the cost for years for the failure of the Fed to rein in risky lending practices on Wall Street. The Fed must share blame – along with other regulators – for not exercising its authority to act sooner to help the middle class.
There are several ways that the Congress can make their preferences known about the Fed’s actions. They can, as Baker encourages, “press forward with the demand for a full audit of the Fed.” They can enact strong financial reform that shifts responsibilities for consumer protection away from a Fed that doesn’t seem to care about it and toward a targeted Consumer Financial Protection Agency. And perhaps most important, they can change the way that the Federal Reserve Board of Governors and heads of the regional banks are elected, so that they aren’t essentially hired by bankers to protect their interests. More than anything, that would, in Baker’s words, “be an important step towards having a Fed that is not exclusively accountable to the financial industry.”