Banking reform starts at the top?

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Het ziet er naar uit dat het Congress handen envoeten gaat geven aan de
banking reform, door een revolutie van de Democraten ;)

Groet / Cees

January 23, 2010
Opposition Grows Against Second Term for Bernanke
By SEWELL CHAN

The confirmation of Ben S. Bernanke to a second four-year term as
chairman of the Federal Reserve ran into further trouble on Friday as
two more Democratic senators said they would vote against him.

The White House came to Mr. Bernanke’s defense, but the Senate majority
leader, Harry Reid, appeared uncertain about whether there were the 60
votes necessary to confirm Mr. Bernanke before his term as chairman
expires on Jan. 31. A spokesman for Mr. Reid said the senator himself
had not yet decided whether to support Mr. Bernanke.

Senator Christopher J. Dodd, Democrat of Connecticut and the chairman of
the Banking Committee, warned on Friday that a no vote would send the
“worst signal to the market right now,” and could lead to an economic
“tailspin.”

In a statement Friday morning, Senator Barbara Boxer, Democrat of
California, came out against Mr. Bernanke, who was named to his post
during the Bush administration. She said she had “a lot of respect” for
him and praised him for preventing the economic crisis from getting even
worse. “However, it is time for a change,” she said. “It is time for
Main Street to have a champion at the Fed.”

“Our next Federal Reserve chairman must represent a clean break from the
failed policies of the past,” Ms. Boxer said.

Another Democratic senator, Russell D. Feingold of Wisconsin, also
announced Friday that he would vote against Mr. Bernanke.

“Under the watch of Ben Bernanke, the Federal Reserve permitted grossly
irresponsible financial activities that led to the worst financial
crisis since the Great Depression,” Mr. Feingold said in a statement.

Senate Democrats leaders had contemplated trying to hold a vote on Mr.
Bernanke’s nomination to a second term this week, but were forced to
hold off after several senators unexpectedly voiced opposition to his
confirmation at the party’s weekly luncheon on Wednesday. Democratic
leaders asked for a show of hands and though aides would not provide a
precise count, Mr. Reid was said to be surprised at the number.

Senators Bernard Sanders, independent of Vermont, and Jeff Merkley,
Democrat of Oregon, are leading the opposition to Mr. Bernanke within
the Democratic caucus. “As chairman, Dr. Bernanke failed to recognize or
remedy the factors that paved the road to this dark and difficult
recession,” Mr. Merkley said last month.

Allan H. Meltzer, a professor at Carnegie Mellon University and an
expert on the Fed, said that the Senate had never voted to outright
reject a nominee for Fed chairman and that he knew of no instance in
which the president had withdrawn the nomination of a Fed chairman after
it was clear that the Senate would not confirm.

Senators’ stances on Mr. Bernanke have not fallen along the usual
partisan lines. Last year, President Obama nominated Mr. Bernanke, a
Republican who was named the 14th chairman of the Fed by President
George W. Bush in 2006, to a second term. In December, the Senate
Banking Committee voted 16-7 to support Mr. Bernanke for another four
years. Only 4 of the 10 Republicans on the panel supported him: Senators
Robert Bennett of Utah, Bob Corker of Tennessee, Judd Gregg of New
Hampshire and Mike Johanns of Nebraska.

The Senate Republican leader, Mitch McConnell, has not yet indicated how
he would vote. Senator Olympia J. Snowe, Republican of Maine, said on
Thursday that she was leaning toward voting for Mr. Bernanke but had not
made up her mind.

Several liberal Senate Democrats have said they remain undecided as
well, and in a sign of the uncertainty on the Democratic side, Mr. Reid
has asked Mr. McConnell to count the votes on the Republican side.

To some degree, Mr. Bernanke is caught up in the same kind of populist
anger that defined the Massachusetts Senate race, in which the
Republican candidate, Scott Brown, pulled off a remarkable upset on
Tuesday by beating his Democratic opponent to take the seat long held by
Edward M. Kennedy.

Mr. Feingold, who announced his opposition on Friday, is among the most
liberal senators, and Ms. Boxer faces re-election this year, a tough
mid-term cycle for Democrats.

But opposition to Mr. Bernanke has emerged from both the left and the
right, as anger has mounted over the Fed’s extraordinary interventions
in the market in 2008 — which have been lumped together with the huge
bailouts of big financial institutions — and over the perceived
regulatory failings of the Fed in the years preceding the crisis.

Some economists also believe that the Fed’s policy of low interest rates
in the early part of the last decade laid the groundwork for the housing
bubble; Mr. Bernanke was a member of the Fed’s board of governors for
part of that period, when Alan Greenspan was chairman.

On Friday morning, a White House spokesman, Bill Burton, said President
Obama “has a great deal of confidence in what Chairman Bernanke did to
bring our economy back from the brink” and “continues to think he is the
best person for the job and will be confirmed by the United States Senate.”

Four senators have placed holds on Mr. Bernanke’s nomination: three
Republicans, Jim Bunning of Kentucky, Jim DeMint of South Carolina and
David Vitter of Louisiana, and an independent, Bernie Sanders of
Vermont, who describes himself as a socialist and who caucuses with the
Democrats.

Other Democratic senators who are strong supporters of Mr. Obama have so
far withheld their support. Senator Claire McCaskill of Missouri said
Thursday that she was undecided. Senator Sheldon Whitehouse of Rhode
Island said he was “not leaning favorably,” the Capitol Hill newspaper
Roll Call reported.

On Thursday, Mr. Reid, the majority leader, met with Mr. Bernanke about
the nomination. Mr. Reid issued only a lukewarm statement after the meeting.

“The American people expect our economic leaders to keep Wall Street
honest and level the playing field for middle-class families, and I will
continue to hold their feet to the fire to ensure this happens,” Mr.
Reid said. “As the Senate prepares to take up Chairman Bernanke’s
nomination, I look forward to hearing more from him about how he intends
to address these issues.”

Mr. Bernanke, a renowned Princeton economist and an expert on the Great
Depression, is also seen as having not sufficiently answered questions
from members of both parties during his confirmation hearings last year.

Richard C. Shelby of Alabama, the top Republican on the Senate Banking
Committee, criticized Mr. Bernanke on Thursday, saying he was part of
the problem of banks considered “too big to fail.”

Mr. Shelby told CNBC that he had supported the Fed in the past, “but as
a regulatory body, I believe they failed the American people.”

He added, “I asked Chairman Bernanke how much time his board of
governors spent on regulatory affairs: Was it 1 percent, 2 percent, 10
percent? And he never gave us even an answer. It was 1 percent. So I’m
not going to support the Fed chairman.”

If Mr. Bernanke is not confirmed, his term as chairman will expire on
Jan. 31. However, he would remain a member of the board of governors, as
he holds a separate 14-year appointment that does not expire until 2020.

The Federal Open Market Committee — the panel that votes on the Fed’s
crucial interest rate — is to hold the first of its eight meetings this
year next Tuesday and Wednesday, a few days before Mr. Bernanke’s term
is to expire. At that meeting, as is the custom, Mr. Bernanke is to be
elected chairman of the committee, by virtue of his position as chairman
of the board of governors.

The next meeting to set monetary policy is scheduled for March.

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