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Fed Chief Bernanke Faces Political Pushback from Republicans

1 year ago
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Bruce Drake
Bruce Drake
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The authority of the Federal Reserve, the nation's central bank, and its chairmen has depended much on the perception of their independence and being above the political fray. That's a line that the current Fed chief, Ben Bernanke, is finding very hard to walk, especially after the Fed's decision earlier this month to pump $600 billion into the economy in hopes of jump-starting what has been an anemic recovery.
Bernanke is, by now, no stranger to this challenging exercise. He got a big taste of it when he, along with former Treasury Secretary Henry Paulson, and the backing of then President Bush, created the $700 billion plan to bail out the nation's financial institutions in the face of the 2008 economic meltdown.
That plan, the Troubled Asset Relief Program known as TARP, became a toxic issue in this year's midterm elections for many lawmakers of both parties who voted for it. Poll after poll showed that the majority of Americans strongly disapproved of it even when the argument was made that TARP was the price that had to be paid to avoid an even worse economic disaster.
Ben BernankeNow the Fed is being plunged back into the political debate after its Nov. 3 decision to buy up a big chunk of Treasury debt in hopes that the move will further drive down long-term interest rates for mortgages and corporate bonds, and spur more spending and investment.
That move came in the wake of an election in which Republicans capitalized on rising concern over the deficit and widespread belief that the surge of economic stimulus spending approved last year hadn't worked. Unsurprisingly, the Fed's move has been swept up by those same concerns.
A group of former Republican officials are planning an advertising campaign to criticize Bernanke for the new plan, the Politico reported Tuesday. Republican Minority Leader John Boehner backs the effort. His spokesman told Politico, "Boehner has grave concerns about the Fed's recent actions."

On another front, Indiana Rep. Mike Pence, a leading conservative voice among Republicans, introduced legislation Tuesday to limit the Fed's activities to maintaining price stability and controlling inflation -- a move triggered by the Fed's bond-buying move. Pence said it was time to end the Fed's so-called "dual mandate" of dealing with the issues of inflation and "maximum employment."

The dual mandate was set in an amendment to the Federal Reserve Act in 1977.

Pence's call for action was echoed by Tennessee Sen. Bob Corker, a Republican member of the Senate Banking Committee, who said, "Providing our central bank with a clear and explicit focus on keeping inflation low will serve America better than the broader mandate approach we have today."
Former House Speaker Newt Gingrich, who is eyeing a run for the 2012 GOP presidential nomination, joined the attack on the Fed action Tuesday.
Interviewed on ABC's Good Morning America, Gingrich said Bernanke "is fundamentally misreading the economy. This economy lacks confidence in the government. It doesn't lack cash."
Alabama Sen. Richard Shelby, the top Republican on the Senate Banking Committee, told ABC News he shared Bernanke's concern about the economy, but said, "Bernanke would not be in this position had President Obama and the Democrats used their power to enact pro-growth policies. Instead, they have grown government and created the most anti-business regulatory environment our country has ever seen."
On Monday, a group of 23 well-known economists, investors and political strategists, nearly all of them associated with the Republicans, published an open letter to Bernanke in the Wall Street Journal saying the Fed's action "should be reconsidered and discontinued."
"We do not believe such a plan is necessary or advisable under current circumstances," the signers said. "The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment...In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus."
Their concern about driving down the value of the dollar had also caused headaches for President Obama at the G-20 economic summit meeting in South Korea during his recent overseas trip, where leaders of some of the world's largest economies depicted it as a move that would reduce the costs of U.S. exports, making them more competitive, and potentially spark a currency war.
Janet Yellen, the Fed's new vice chairwoman, defended the bond purchase plan in an interview conducted last week and published in the Wall Street Journal on Tuesday.
"I'm having a hard time seeing where really robust growth can come from" without the Fed action, she said. "The economy also has real downside risk. It's conceivable that growth could fall short of what we're expecting and unemployment could start heading up further. And if we really get a weak scenario with unwinding confidence or, who knows, larger losses for financial institutions, we could find ourselves with a downward dynamic occurring that really takes us into very difficult terrain."
"I am not happy to see us caught up in a political debate," she said. "But Congress has assigned us tasks which we need to carry out as best we can. To fail to take action that is in our power that we, in our best judgment, believe to be helpful to the economy -- that would be political."
While there has long been an undercurrent of distrust for the Fed in some political circles, particularly among Republicans, it has rarely been in a position where politicians and lawmakers have pulled it into partisan politics.
One exception has been Texas Rep. Ron Paul, an unsuccessful candidate for the GOP presidential nomination in 2008, who has long been a vocal critic and wants to see the Fed phased out.
Ironically, as a result of the Republicans capturing the House, Paul could find himself head of a subcommittee overseeing the Fed since he is ranking member on the Financial Services Subcommittee on Domestic Monetary Policy and Technology.
Paul told CNN Money that if the Republican Conference votes to confirm him as chairman of the subcommittee, he doesn't expect to be able to push through his proposal to eliminate the Fed, but will use his position as a "bully pulpit" for his criticisms of the central bank.
Filed Under: Republicans, Economy
Tagged: Ben Bernanke, Bob Corker, Economic stimulus, Federal Reserve, Mike Pence, Newt Gingrich, recession, Ron Paul, Troubled Asset Relief Program
More articles from Bruce Drake »

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15 Comments

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myeager2

Non political Fed? You're kidding of course. Every Fed bank owns and controls 'holding banks', subsidiaries, fully owned. Each does more campaign contributing than they do lending. they buy laws and candidates on a minute by minute basis and it hasn't changed since the Reserve took over America's political process, better known as, advertising.

November 17 2010 at 1:48 PM Report abuse +1 rate up rate down Reply
vjohn10152

this is another move buy republicans to hurt the economy at america's expense.

November 17 2010 at 11:50 AM Report abuse -2 rate up rate down Reply
rachfoote

I am not sure that ALL Republicans are going to back the elimination of"bailouts just for bailing out". Too much BIG money corporation influence in their party. Not that it is a total backing, but when their personal monies started getting effected, the squeal like the rest of the politicians.

November 17 2010 at 11:17 AM Report abuse rate up rate down Reply
sysaphus71

Mr Bernanke, I can see the results of the QE2 already....as you know the price of a barrel of oil is tied to the dollar. Since you have decided to dump $600 billion into the money supply ,the price of gas has gone up 0.22 cents in 10 days. Good job... and milk is up 0.50 I suppose you would like to take us back to $4.00 and above gas so you can take credit for finally finishing off the economy......Your actions need to be undone. Lowering the dollar is NOT in an instant going to have the rest of the world buy our products, which you seem to believe. You need to get out of the ivory tower and see what REALLY goes on out here because of your "theories" The world is telling you not to do what you are doing....what is the problem?...do you suppose to be that smart?. I got to tell you...not from where I'm standing does that appear to be the case. If you want the economy to recover STOP PRINTING MONEY,STOP OVERSPENDING AND START BURNING SOME OF WHAT YOU PRINTED!! This economy is held at a standstill because of what most Americans who are paying attention and are not attached to the government teit knows!!! It is the policies to this inept administration that has the private sector and small business on the side lines and waiting for more experienced government before they move to hire and invest. Best course of action....tell your boss to cool it and let the Republicans take over. This administration has proved over and over ,they don't know what they are doing and the public's suffering and anger is still building.

November 17 2010 at 9:20 AM Report abuse +13 rate up rate down Reply
allisonisa39e

"I'm having a really hard time seeing where really robust growth can come from" with the Feds action. When you try something and it does not work and you keep trying it that is the sign of a Psychotic. Psychotics can be very deceitful and may rise to positions of power. What you have to look for is "what do their actions result in". Destroying the economy of the USA is not what I would call a sane act.

November 17 2010 at 8:23 AM Report abuse +10 rate up rate down Reply
John Vilvens

Printing money devalues the dollar. This is like another stimulus package but obama did not have to pass it through congress, he just had to tell Bernanke to print a trillion. The Federal Reserve needs to be investagated, then closed down. This make exporting good hard as a dollar is not worth anything and good will cost and inflated rate.

November 17 2010 at 5:25 AM Report abuse +8 rate up rate down Reply
peggy

play now everyonehas there panties in a bunch... why were people not doing anything about this under the bush presidency that caused this entire mess that we are in now. I havent seen anything positive coming out of republicans mouths yet. America is doomed under rpubs and the tea baggers

November 17 2010 at 1:13 AM Report abuse -6 rate up rate down Reply
mcdmackey

The Federal Reserve just did what the GOP has never had guts to do. They just changed the foreign junk that some like to buy more expensive. Buy American and employ your son's and daughter's.

November 16 2010 at 9:25 PM Report abuse -13 rate up rate down Reply
Paul

Monetizing the debt will be the undoing of the Federal Reserve and by extension, the United States. Bernanke is a tool. Obama created a new Agency of the government simply through Executive Order and decided to fund it through the Federal Reserve. Exactly where in the Constitution does this authority arise? This entire government is a complete joke.

November 16 2010 at 8:27 PM Report abuse +13 rate up rate down Reply
1 reply to Paul's comment
allisonisa39e

Both Bernanke and Obama and Bush and Clinton before him are tools of very powerful people in the World that want the US to disintegrate as a world power. If they can destroy us financially they will do so. The Euro has already started to be destroyed.

November 17 2010 at 8:29 AM Report abuse +5 rate up rate down Reply
seeker2be

Who elected Bernacke president? He needs to stop this buyback and inflation of the dollar now or go to jail for theft.!

November 16 2010 at 8:12 PM Report abuse +9 rate up rate down Reply

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