Bernanke Confirmation
I have left Bernanke’s confirmation for a second term at the Fed uncommented upon for the simple reason that I have little to add. But for the record: on balance I opposed his re-appointment.
On the negative side:
- He has shown little indication that he intends to adjust the Fed’s activities in light of the experiences from the crisis.
- He was culpable in the run up to the crisis because he maintained the low interest rate and easy money regime of his predecessor.
- He seems incapable of advocating of implementing thorough bank reforms.
- He is insensitive to the need for a consumer protection agency in finance.
- He is too wedded to orthodox economic principles.
On the positive side:
- He reacted well and forcefully once the crisis began.
- He implemented a highly unorthodox ‘quantitive easing’ program once it became apparent that orthodox policies were having no effect.
- He is a known quantity to the markets.
- He is one of our leading experts of crises such as the one we just went through.
In my opinion the negatives above outweigh the positives and therefore he should not have been re-appointed.
The 70 – 30 vote in the Senate was a historically narrow margin in favor of re-appointment, so evidently opposition ran strongly against him. Those who voted to support him have, by extension, voted in favor of the entire set of actions the Fed undertook and is currently undertaking in support of the economy. This does not augur well for reform. The discussions and questioning that accompanied the confirmation hearing simply stand as testimony to the shallow and politicized nature of the Senate’s procedures. Bernanke should he been raked over the coals, and asked, in far more detail, to reveal what actually went on during crises negotiations and policy meetings. Instead the Fed remains an opaque and mysterious body beholden to the banks it supposedly regulates. Even its geographical organization is riven through with anachronism: we have two Fed districts in the farm belt, but none in the southeast where much of the crisis brewed. California remains horribly under represented, as does the South. A more modern structure may have meant more or better information flowing in about local housing conditions.
I am getting tired of coming across instances of systemic or structural problems in American governance. The entire edifice is overly rigid and extraordinarily unresponsive in times of crisis. This is partly due to the fact the constitution was deliberately framed to act against change – in particular to prevent democracy from breaking the peace and quiet of the status quo; and partly due to an unwillingness to recognize or correct deficiencies. Americans are seemingly indifferent to the system of government that affects so much of their lives. The wild over-influence of the farming states both in the senate and in the Federal Reserve Board acts as an anchor preventing change. It is undemocratic and unfair.
And it helps lead to the legislative gridlock that now is crippling the Senate, and therefore the country as a whole.
Bernanke’s confirmation hearing should have acted as a lightening rod for thorough debate about recent monetary policy and prospective financial system reform. Instead it became yet another gentlemen’s club discussion and a processional affirmation of a ‘good old boy’. That 30 senators mustered the energy to vote ‘no’ in such sclerotic circumstances surely implies that discomfort and anger must be pent up in that musty, old fashioned, and anti-democratic hall. If this is the best they can do to vent those feelings it is no wonder nothing gets done there.
Thomas Jefferson was right: we don’t need the Senate. It is a quaint anachronism that should be abolished.
