Bernanke's Done Deal Reconfirmation May Not Be A Done Deal After All

Tyler Durden's picture

With everyone expecting the Chairman's reconfirmation process on Thursday to be merely a formality, Senator Bob Corker throws this wrench after he "said he wasn't sure yet whether the chairman had the votes on the Banking committee or in the Senate as a whole." The Hill reports, "I don't know where that sits," Corker told reporters when asked if
Bernanke would have the votes to get a second term, adding he wasn't
sure whether Bernanke would have the votes in the 23-member Senate
Banking Committee, either.With numerous grassroots campaigns coalescing around the public disappointment surrounding Bernanke Wall Street-centric policies, it just may happen that his renomination could prove far more problematic than previously expected.

Corker noted that he leans toward supporting a second term for the Fed
chairman, who was nominated in August to a second term by President
Barack Obama, but acknowledged gripes toward the Fed chairman on the
left and the right.

 

Democrats, Corker said, had some reservations about Bernanke's role in
consumer protection, while Republicans have been uneasy about his role
in orchestrating bailouts for the financial sector.

Sen. Richard
Shelby (R-Ala.), the top Republican on the Banking committee, would not
say how he would vote on Bernanke's nomination, only encouraging
reporters to stay tuned for the chairman's hearing this week.

"I used to be a big defender of the Fed," he said, adding he believes
the institution has "utterly failed" in its role for regulating
financial institutions.

Some other senators have said they would vote against Bernanke.

"I
think it makes no sense to reappoint somebody who's an integral part of
the problem," Sen. Bernie Sanders (I-Vt.) said during an appearance on
the liberal Bill Press Radio Show podcast earlier today. "I certainly
will not be voting to reappoint Ben Bernanke."

Zero Hedge once again urges Senators to canvass the list of questions below (as well as here) and demand responses from the most powerful man in America before allowing him to continue his bubble-inflating ways for another 4 years, lest they themselves soon suffer the public's anger for not performing any due diligence on the most important Fed Chairman reconfirmation in American history.

1. The TARP Inspector General recently disclosed that the New York
Federal Reserve did not believe that AIG's credit-default swap (CDS)
counterparties posed a systemic financial risk. In Congressional
testimony and elsewhere, you have stated repeatedly that AIG posed a
systemic risk based partly on its CDS obligations [source:
Bernanke's testimony to the House Financial Services Committee,
3/24/09]. Explain this apparent contradiction. What was your specific
role in the decision to pay AIG's counterparties 100 cents on the
dollar?

2. On May 5, 2009, in front of the Joint Economic
Committee, you said the following about the unemployment rate:
"Currently, we don’t think it will get to 10 percent. Our current
number is somewhere in the 9s" [source].
In November it hit 10.2%, and many economists predict it will go even
higher. This is happening despite enormous fiscal and monetary stimulus
that you previously said would help create jobs. What happened after
your JEC testimony in May that caused your prediction to miss the mark?

3.
It's now widely accepted that loose monetary policy is at least partly
to blame for the credit bubble and subsequent crash. You played an
important role in that policy. For eight straight meetings of the FOMC,
from June 2003 to May 2004, you voted to keep the Fed funds rate at 1%.
But transcripts of recently-released FOMC meetings show you wanted the
FOMC to consider cutting rates even further. In the August 12, 2003
meeting, with the Fed already at 1%, you said:

   
Despite the good news, I think it’s premature to conclude that we
should not consider further rate cuts, if not at this meeting then at
some time in the near future depending on how the data play out. [source: transcript of FOMC meeting on 8/12/03, page 63]

How
much worse would the bubble and subsequent crash have been if you had
gotten your way? What do your comments in that meeting imply about your
ability to correctly time the reversal of the Fed's current
accommodative policy?

4. Forecasts are an important part of the
Fed's work. Monetary policy by nature depends on forecasts, making
predictive ability an essential part of the job description for any Fed
chairman. Yet your record of predictions, including the one about
unemployment in (2) above, is questionable at best. Some examples [source]:

March
28, 2007: “The impact on the broader economy and financial markets of
the problems in the subprime markets seems likely to be contained.”

May
17, 2007: “We do not expect significant spillovers from the subprime
market to the rest of the economy or to the financial system.”

Feb.
28, 2008, on the potential for bank failures: “Among the largest banks,
the capital ratios remain good and I don’t expect any serious problems
of that sort among the large, internationally active banks that make up
a very substantial part of our banking system.”

June 9, 2008:
“The risk that the economy has entered a substantial downturn appears
to have diminished over the past month or so.”

July 16, 2008: Fannie Mae and Freddie Mac are “adequately capitalized” and “in no danger of failing.”

Explain
this pattern of terrible predictions and forecasts. What do they imply
about your ability to conduct policy going forward? Is there some fatal
flaw in your economic models or forecasting tools? Are you just winging
it?

5. Derivatives such as credit-default swaps played an
important role in the financial crisis, and they are central to the
financial reforms currently being contemplated. During the Senate
Banking Committee's hearing in November 2005 to confirm you as Alan
Greenspan's successor, you had the following exchange with Senator Paul
Sarbanes [source]:

   
SARBANES: Warren Buffett has warned us that derivatives are time bombs,
both for the parties that deal in them and the economic system. The
Financial Times has said so far, there has been no explosion, but the
risks of this fast growing market remain real. How do you respond to
these concerns?

    BERNANKE: I am more sanguine about
derivatives than the position you have just suggested. I think,
generally speaking, they are very valuable. They provide methods by
which risks can be shared, sliced, and diced, and given to those most
willing to bear them. They add, I believe, to the flexibility of the
financial system in many different ways. With respect to their safety,
derivatives, for the most part, are traded among very sophisticated
financial institutions and individuals who have considerable incentive
to understand them and to use them properly. The Federal Reserve’s
responsibility is to make sure that the institutions it regulates have
good systems and good procedures for ensuring that their derivatives
portfolios are well managed and do not create excessive risk in their
institutions.

How did you get it so wrong?

6.
An important factor in the financial crisis (and a large part of the
ultimate cost to taxpayers) was the implicit government guarantee of
the GSEs. In part because of decisions you made, there is now an
explicit government guarantee of every large firm on Wall Street. Has
moral hazard increased or decreased over the past year?

7. Via
the FDIC, the American public now explicitly guarantees the bonds of
Wall Street firms where bonuses are surging and individual employees
can be paid millions of dollars a year. What is your opinion on the
morality of this guarantee?

8. The importance you place on the
output gap is well known. You have often cited "excess slack" in the
economy to justify loose monetary policy, arguing that a large output
gap lowers the risk of inflation. But economists such as Allan Meltzer
have noted that there are "lots of examples of countries with
underutilized resources and high inflation. Brazil in the 1970s and
1980s" [source].
Moreover, in a new paper dated December 2009 and titled "Has the Recent
Real Estate Bubble Biased the Output Gap?", researchers at the Federal
Reserve Bank of St. Louis state the following:

   
Because this (predicted) output gap is so large, several analysts have
concluded that monetary policy can remain very accommodative without
fear of inflationary repercussions. We argue instead that standard
output gap measures may be severely biased by the bubble in real estate
prices that, according to many, started around 2002 and burst in 2007.

They
conclude with a warning that seems directed at you: "We offer a word of
caution to policymakers: Policies based on point estimates of the
output gap may not rest on solid ground."

Please comment on 1)
Allan Meltzer's point and 2) the St. Louis Fed's research paper. Why do
you continue to put such a high priority on the output gap?

9.
In a scenario in which unemployment remains uncomfortably high, but the
dollar continues to fall and commodities including oil and gold
continue to rise, what would the Fed do? At what point do market
signals take priority over hard-to-measure statistics like the output
gap?

10. The Fed has a dual mandate: maximum employment and
price stability. But unemployment is at its highest level in decades.
And in early and mid-2008, with oil at $150 a barrel and prices of
basic staples skyrocketing, opinion polls showed that inflation was the
public's highest concern, even more so than jobs or the housing market [source].
Why has the Fed failed so badly in its mandate? Is employment an
appropriate objective for monetary policy? Should the Fed have a single
mandate of price stability?

11. In February 2009, Janet Yellen,
president of the San Francisco Fed, said that the Fed needed to fight
back against the argument that its liquidity efforts would eventually
lead to higher inflation and higher interest rates, calling the notion
"ludicrous" [source].
Since then, the dollar has fallen precipitously, oil has almost doubled
in price, and gold has surged to all-time highs. Do you share your
colleague's view on inflation?

12. What does the surge in gold
mean to you? At what price level would it begin to worry you, if it
doesn't already? Does gold have any impact on the Fed's policy
deliberations?

13. Why does the Fed insist on waiting five years
before it releases transcripts of FOMC meetings to the public?
Shouldn't someone tasked with evaluating your performance and voting on
your reconfirmation have access to transcripts from late 2008 and early
2009?

14. Has the Fed ever had an internal debate about how
monetary policy contributes to geopolitical tensions via the rising oil
prices caused by a falling dollar?

15. Before the financial
crisis there was a widespread sense, especially on Wall Street trading
desks, that the stock market was strangely resilient. This encouraged
excessive risk-taking in various types of assets. Do you have direct or
indirect knowledge of the Federal Reserve or any government entity or
proxy ever intervening to support the stock market (or any individual
stock) via futures or in any other way? If yes, who decides the timing
of such intervention and with what criteria? How is it funded? Which
Wall Street firm handles the orders, and who sees them before they are
executed?

Questions courtesy of the Cunning Realist

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Anonymous's picture

I'd like to think that speculation among [i]them[/i] really is as such, but unfortunately the feeling pulsating through me screams a mere formality of disclosure.

spekulatn's picture

Talk about a turd in the punch bowl....let the games begin.

tomdub_1024's picture

"turd in the punch bowl"...love it! Adding to my arsenal of sarcastic metaphors...thanks! :)

Andrei Vyshinsky's picture

Bernanke does the bidding of the ruling clique, they want him, sad to say they'll get him. Trying to stop this appointment would be like trying to convince Obama to stop killing kids in Afghanistan or to defund Israel's next war crime.

steve from virginia's picture

 

Bernanke's reappointment is a done deal. He has too much on too many people for the outcome to be otherwise. He's an updated, confabulated merger of J. Edgar Hoover and Boss Tweed, Obama likes and trusts him. He's bailed Goldman. He's allowing the current Fed/Treasury money laundering racket to proceed full throttle. Why are the stock and other markets rising? Laundering derivatives and other securities into cash is the name of the game. The rats are abandoning the sinking ship of finance, Bernanke is holding the gangplank. He has to stay!

The two main things in his favor.

a) He's holds hostage most business interests and ... as a consequence most in the Senate.

b) The entire government is 'broke worse' than the Fed.

We're stuck with Bernanke, until the lights all go out.

Careless Whisper's picture

Take me to the magic of the moment
On a glory night
Where the children of tomorrow dream away
In the wind of change

http://www.youtube.com/watch?v=rMUX_4B-Hr4&feature=fvst

 

Daedal's picture

http://www.zerohedge.com/content/confidence-game-quotes

Let's not forget these gems:

March 28th, 2007 – Ben Bernanke: "At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,"

May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.”

June 20th, 2007 – Bernanke: (the subprime fallout) ``will not affect the economy overall.''

October 15th, 2007 – Bernanke: "It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions."

February 29th, 2008 – Bernanke: "I expect there will be some failures. I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system."

March 18th, 2008 - Bear Stearns Bailout Announced

June 9th, 2008 – Bernanke: Despite a recent spike in the nation's unemployment rate, the danger that the economy has fallen into a "substantial downturn" appears to have waned,

July 16th, 2008 – Bernanke: (Freddie and Fannie) “…will make it through the storm”, "… in no danger of failing.","…adequately capitalized"

September 8th, 2008 - Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated 1 - 1.5 trillion dollars. Over 5 trillion is added to the nation’s balance sheet.

September 16th, 2008 - $85 Billion AIG Bailout “Loan”

September 19th, 2008 - $700 Billion Bailout Plan Announced

September 19th, 2008 - Bernanke: "most severe financial crisis" in the post-World War II era. Investment banks are seeing "tremendous runs on their cash," Bernanke said. "Without action, they will fail soon."

Kurtieboy's picture

Don't be delusional. Its a done deal.

Cursive's picture

Bernanke has been in the FR system for a long time.  He is the perfect embodiment of a pointy-head, leather-patch-on-the-elbow-of-the-sportcoat professor who wouldn't know reality if it walked up and slapped him in the face.  He was failed utterly and he had the audacity to add the I've-studied-the-Great-Depression hubris to the FAIL.  The hearings would be better suited to determine what we do with this criminal.  He and his banking cartel should be dismantled and serving time.

Anonymous's picture

There's always that dude from the AFL/CIO... lol

Anonymous's picture

We need the senators to read this article. I bet it would change their minds about reappointing Ben. I wonder if any of them actually have or do read anything from ZH or have even heard of ZH?

I seriously want to see Ben trying to answer these questions.

Anonymous's picture

Sir, those questions are brilliant, obvious and shall be filed in the circular file on your way out. You obviously don't understand how the financial markets work. Be a good soldier and run along now.

George Washington's picture

Great job, TD.  I just thought of another question:

Robert Auerbach - professor at the Lyndon Baines Johnson School of Public Affairs at the University of Texas at Austin - has exhaustively documented that the Fed's Open Market Committee has kept verbatim transcripts of its meetings. But when the Fed was caught lying about the existence of the transcripts, they shredded them.

Is Mr. Bernanke still shredding the transcripts from FOMC meetings?  Or are they being retained?

Miles Kendig's picture

At that level there is a requirement to maintain a record of each telephone call.  Not just the number/date/time stamp, but a synopsis of each call.  This requirement also is supposed to hold true for notes taken during meetings.  I wonder if these notes have been properly copied and maintained?  Especially since each call is supposed to be able to be closed looped with this supporting documentation as are the formal minutes of meetings with the notes taken by its participants.

waterdog's picture

Your questions should be asked. Bernanke needs to come clean. It is important that he does not look like he is lying when in fact he is not. In the marriage that will be played out on Thursday, Bernanke needs to be understanding. He should disclose everything that the committee whats to know. He needs to explain clearly why the dollar is where it is and who is benefiting from it- tells us who got the money. After he tells us everything we want to know, he can then stand up, look the committee in the eye, and tell the committee to go fuck itself, and walk out. He will be confirmed at that moment.

 

If he does come clean, give him more time. If he does not, fire him.

 

Zippyin Annapolis's picture

Senate Banking members are in a closed meeting tomorrow at 3pm to discuss--e-mail your favorite Banking Senator!

depression's picture

I hope they bring in Elin Nordegren to tee off on his ugly bald head.

 

JohnKing's picture

He'll get a scolding for the cameras and he'll get the re-appointment.

Anonymous's picture

I doubt the eloquence of your questions would be met with a similar eloquence in answers.

DavidC

Rollerball's picture

CONgress will do what their pocket protractors tell them to do.

deadhead's picture

Standing ovation on this and the questions.

I urge you to contact your Senator.

I have on several occasions....unfortunately, my Senator is Schumer and the safest trade in the world is to go long on Schumer overwhelming supporting Bernanke.

Rainman's picture

Such a laundry list of non-performance deserves a round of fukking applause.

The Critters will knock him around a bit. But just remember, this mess is a TOTAL GOVERNMENT FAILURE....... and to the Critters, Ben's a made guy . Ain't about to give him up.

deadhead's picture

from B'berg:

Jim Bunning, the Kentucky Republican who was the only senator to oppose Bernanke’s first nomination in 2005, hasn’t changed his views.

“His job rating would be zero minus F,” Bunning said in an interview today. “He has catered to the big banks, to the Wall Street elitists, to every major money concern in the country and in the world.”

Ya gotta admit, "zero minus F" is an interesting grade.....

Anonymous's picture

Bunning = not the brightest bulb in the Senatorial chandelier.

virgilcaine's picture

Gold has doubled in Bernankes term.

phaesed's picture

I think perhaps one or two might go through... shame, it should be all

 

And no, it's not a done deal Bernanke passes.

cougar_w's picture

The appointment is his to lose. So yeah, he might.

He might refuse to answer any questions at all, for example, on the theory that he can only hurt himself, and someone gets pissed as a result. But I wouldn't put any of my own money behind that bet.

cougar

Gimp's picture

The professional politicians will do whatever the bankstas tell them to do. No questions asked.

 

Anonymous's picture

Do you really think the country that reelected Bush will not reappoint Bernanke?

perchprism's picture

 

Gold is at $1203 as of 7:45 pm eastern

Miyagi_san's picture

16  Did you really say, "contagion is confined to subprime"

boooyaaaah's picture

I vote to re-appoint

And then continue the investigation, and the audit

Now Ben is available

If he is not reappointed --- he will be like Hank Paulson

Gone (and spending our money)

johngaltfla's picture

It's not who you know, it's who you can buy. And banksters can buy nations. They will see to it he gets confirmed BUT if he crosses Obama with more or a threat of tightening, America's Caesar will promote a campaign against him and pack the bank districts and head with his stooges....

Edna R. Rider's picture

It is utter BS that these idiot Senators would suggest Bernanke won't be reconfirmed.  I only wish this country had elected leader with such balls.

lizzy36's picture

Unfortunately, according to this story the beard has the votes.  The chance of any of the senator's mentioned in this article asking any one of the 15 questions listed above (never-mind all 15) is about the same as Tyler modelling the thong in the ZH swag shop. 

Chris Dodd is such a balless fuck, no wonder he is Chairmen of this Committee.   

Committee Chairman Christopher Dodd, a Connecticut Democrat, said today that Bernanke has “done a pretty good job,” and that anger in Congress over the Fed’s role in the financial crisis is “misplaced.” Judd Gregg, a New Hampshire Republican, said Nov. 20 he will “absolutely” vote for Bernanke.

Bernanke Has Support of Majority of Senators on Banking Panel

http://www.bloomberg.com/apps/news?pid=20601087&sid=aFLd_hsTLKyw&pos=3

Anonymous's picture

Cut all the bullshit questions that J6P wouldn't understand, and if they don't your senators won't want to ask them. Just ask: 2 questions pertaining to the Fed';s dual mandate of full employment and price stability:

1) Why is it after 2 trillion dollars of money printing, banksters are getting paid millions yet 17 millions americans and counting are without jobs?

2) Why is it that americans today are paying more for gas since Ben took over in 2004 and buying less with their salaries every week?

Handle with care's picture

More pertinently, why have American living standards been stagnant since 1973 and have actually fallen for the bottom 40% while 90% of the benefits of economic growth in the last 30 years have gone to the top 2% leading to 3rd world levels of income inequality?

 

This is not an accident or some immutable force of inscrutable nature, but a result of deliberate policies.  Do you intend to continue these policies? If yes, why should the 98% of Americans who won't benefit see your confirmation as a good thing?  If not, what alternative policies do you intend to enact?

BoeingSpaceliner797's picture

HWC,

 

Bingo!  To restate my post on George Washington's original article regarding this subject/these questions, #16, please explain to this body why not only should you not be reappointed but why the FRB and FOMC should continue to exist.  Further, please explain why the National Banking Act, 1913 FRA and all subsequent legislation regarding your institution should not be immediately revoked/repealed, considering that every act taken by your institution for at least the past 30 years has demonstrated outright contempt for 98% of us.  Please do not answer until we have connected the polygraph.

Anonymous's picture

We know the answer to 15 already, don't we now. 100 mill a day trading paper with only 1 losing day in a 1/4. That would be Gollem Scourge.. The apex of evil and corruption. The Mossad of finance.

A_MacLaren's picture

I've reminded my slimator, I mean senator, he needs to ask tough questions and get real answers to questions like those above (yeah, yeah I picked 13 of the 15 and left off anything to do with gold).

 

I also reminded him to support the Constitution and We the People, and that his competing legislation to S.604 is not supportive of the real needs to correct the flaws in the Fed system, and the distortions to free market capitalism the Fed creates.

rapier's picture

Anything is possible. Firstly this hearing is with the committee who will vote to pass the the nomination on to the full Senate for a vote.  The committee process is totally broken as is the entire legislative process which is aimed a stopping all votes, the GOP has already fillibustered 90 bills this session. That is why it takes 60 votes to get anything to a vote. Then there are the annonomous holds Senators can put on nominations. Hundreds are being held up now.  Every Senator can be a little president.

Anyway, for most matters the little presidents are filled with delight in being able to muck things up. However in this case they are being told that rejecting Ben's nomination might destroy confidence and the markets may crash. Now the if your a little president and you vote against even letting the nomination out of committee for a full vote and the markets do crash history books will have your picture next to crash.  One or two may make a symbolic stand on this vote but it will get out of committee for a full Senate vote. As it should. Fuck these little presidents.

Now there is a slight chance the Senate could reject. A miniscule chance. Remember the first TARP vote and the congress critter yelling out as the vote was going on, DOW down 600? I thought you did. It passed the next time. Every 'serious' person in the Beltway and Wall Street is whispering in these guys ear now. Reject Ben and you might destroy the nation. Nobody has the balls. Yes, a few will vote against, as long as they know he will pass. Well that's how it has to be figured.

Perhaps some wave of populism will strike and strike a blow against everything our politics has become over the last near 20 years. If Ben is rejected the gates of hell open for all markets in all places. Not so much because he is the essential man but because he is their selected essential man. Rejecting him throws everything into question.  These congress critters have one hell of a nice gig.  They want to keep it. I would dare to say that if a final vote gets close and a few key yeas or nays are the deciding ones then those people will be get threats and offers they cannot refuse.

Ned Zeppelin's picture

Even better, if you're a senator who is short some sweet bling this holiday season, hold out til the bankstas show up to chat and find out what they can offer to get this little deal done.  Sounds like Managing Your Political Career 101 to me.

More and more I think, forget about fighting Bernanke and insist on S. 604.

Dadoomsayer's picture

Just another senator that wants money put in his "special piggy bank"

chindit13's picture

The fork has been stuck in it (Bernanke's re-confirmation), and it came out clean.

One or two of these questions will be asked, but Bernanke will either find something to "not recall" or he will avoid the question with a droll speech that sends anyone in the audience still awake into a slumber.  Bernanke will not have a single moment of discomfort, and most members of the committee will spend their alloted time praising him.  It will be a whimper, not a bang.

Bernanke will be re-confirmed, HR1207 will die an ignominious death, Mark Pittman's FOIA request will be delayed by motions until hell freezes over, and the death of the dollar and of the US will continue.  In the meantime, the market will continue higher, WS bonuses will grow larger, at least in nominal terms, and the shift of wealth will continue toward the fittest of our Darwinian Socialist society ("fittest" being the ones with the best access to power).

I wish I was wrong.  And yes, I've sent off emails to everyone who'll have a microphone in front of them.  No doubt every one of the mails went straight to Trash. If democracy allows me another way to try to limit the absolute power of a non-elected official, I'd like to know what it is.

BoeingSpaceliner797's picture

"Democracy is two wolves and a lamb voting on what to have for lunch.  Liberty is a well-armed lamb contesting the outcome."  Attributed to Benjamin Franklin, purely descriptive and not a threat of violence.

Anonymous's picture

Just remember to be careful of what you wish for. Larry Summers is waiting for the opportunity to jump into the drivers seat.