Friday, December 25, 2009

On the confirmation of Ben Bernanke as Fed head

A letter to my senators, which could be regarded as an open letter to all senators, who are now faced with a vote to confirm the chairmanship of the Federal Reserve nominee, Ben Bernanke.


Dear Senator,

I want to follow up on my previous phone call to your office about the reconfirmation of Ben Bernanke as Federal Reserve Chairman. I urge you to vote against another term for him.

Bernanke is one of the architects of our financial collapse. Any vote to reconfirm Bernanke in his post is a vote for a blind and stupid monetary policy, failure to see and warn the public of problems with our financial foundations, and more favors to the "too big to fail" institutions who have fraudulently loaned money, traded those loans for profit, and charged the taxpayer for their criminality and wild risk-taking.

Let me briefly quote from Dean Baker in Counterpunch (, who says it more effectively than I could:

"If Bernanke knew what he was doing, he should have been able to see as early as 2002 that there was a housing bubble and that its collapse would throw the economy into a recession. It was also entirely predictable that the collapse could lead to a financial crisis of the type we saw, since housing was always a highly leveraged asset... as the bubble expanded, and the financial sector became ever more highly leveraged, the risks to the economy increased enormously.

"Through this all, Bernanke just looked the other way. The whole time he insisted that everything was just fine.

"To be clear, there was plenty that the Fed could have done to deflate the bubble before it grew to such dangerous proportions. First and foremost the Fed could have used its extensive research capabilities to carefully document the evidence for a housing bubble and the risks that its collapse would pose to the economy.

"It then should have used the enormous megaphone of the Fed chairman and the platform of the institution to publicize this research widely... It’s hard to believe that such warnings would have had no impact on the bubble, but it’s near criminal that the Fed never tried this route.

"The second tool that the Fed could have pursued was to crack down on the fraudulent loans that were being issued in massive numbers at the peak of the bubble... If Bernanke and his Fed colleagues did not know about these widespread abuses, it is because they deliberately avoided knowing.

"Finally, the Fed could have had a policy of interest rate hikes explicitly targeted to burst the bubble.

"This is what a responsible Fed policy would have looked like. But Ben Bernanke did not pursue a responsible Fed policy. He insisted that everything was just fine until he had to run to Congress last September, saying that if it didn’t immediately give $700 billion to the banks through the TARP program then the economy would collapse."

Bernanke, following in Allan Greenspan's footsteps, has been a disaster for the average American. He's been great for Wall Street bankers. Please find someone for Fed Chairman who saw these problems coming and might therefore be a more credible engineer of policies leading back toward an honest and stable system.

the vitamin kid