Bernanke, Should He Stay or Go?

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By Pete the Banker

On Thursday, December 17, 2009, the Senate Banking Committee approved the nomination of Ben Bernanke as Federal Reserve Chairman for a second term, forwarding it to the full Senate for a final confirming vote.  The vote was 16 to 7 to confirm.  Senator Merkley joined with 6 Republicans to vote in opposition.

The renomination of Federal Reserve Chairman Ben Bernanke by President Obama in August was a surprise.  A recent Rasmussen poll (HERE) showed that only 21% of Americans think Bernanke should be reappointed.  A much larger percentage 39% weren’t sure if he should be renominated and 41% thought the President should name someone else. 

The WSJ laid out a strong case for his reappointment on August 25 (HERE).  They basically feel that his renomination is good news because he now possesses significant experience and he has been active, creative and aggressive in the past year in dealing with the financial crisis.  They also suggest that his continuity will prevent uncertainly in the capital and credit markets. 

Senator Jim Bunning eloquently lays out the case against Bernanke and concluded his Senate statement (HERE) by saying, ““I will do everything I can to stop your nomination and drag out the process as long as possible. We must put an end to your and the Fed’s failures, and there is no better time than now.”   In summary, Bunning feels that Bernanke was too intimately involved in the Alan Greenspan easy money policy which led to the housing crisis and subsequent failure of the capital and credit market. He faults Bernanke for his role in lax regulation and ignoring massive financial risks of derivatives.  He also criticized Bernanke for not displaying sufficient independence from the Treasury.  Bunning also stated at one point, “…the A.I.G. bailout alone is reason enough to send you back to Princeton.”  Bernanke’s apparent failure to forward answers to many of Senator Bunning’s confirmation hearing questions to Senators in time for the confirmation vote has further enraged Bunning.

Larry Kudlow of CNBC suggests that Bernanke has lost the confidence of the Senate and even those on the Committee voting in favor of Bernanke were unenthusiastic about their support and that regardless of final Senate vote that Ben Bernanke should consider stepping down.  He notes that a Federal Reserve Chair has never received fewer than 80 votes on a renomination vote on the Senate floor.  Kudlow states,

“So I think Bernanke’s reconfirmation could be in trouble on the Senate floor. I’m going to bet that most of the 40 Republicans will vote against him, and that they will be joined by a number of Democrats. If Bernanke were to be opposed by as many as 35 or 40 votes, it would substantially undermine his credibility….Unless he thinks he can garner a truly bipartisan vote in the weeks ahead, I wonder if he should consider withdrawing his name.”

 
Is it time for Bernanke to resign?

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