Opinion

The Great Debate

On the Bernanke interrogation

June 25, 2009

James Pethokoukis – James Pethokoukis is a Reuters columnist. The views expressed are his own –

Ben Bernanke’s testimony to Congress about his involvement in the Bank of America-Merrill Lynch merger was a lot like an FOMC statement: short and unadorned, yet open to much interpretation.

When the Federal Reserve chairman wasn’t repeatedly saying “I don’t remember” or “I don’t recollect,” he was matter-of-factly stating that he didn’t intend to threaten Bank of America CEO Ken Lewis with termination if he didn’t go through with the Merrill deal.

Yet both Republicans (all) and Democrats (some) seemed astonished that Bernanke wouldn’t admit that having the Fed outline all the negative repercussions of invoking the “material adverse change” clause to escape the Merrill deal was a de facto threat to BofA management.

Whether or not Bernanke actually believed his script was impossible to prove, since the Republicans, particularly Representative Darrell Issa of California, didn’t have evidence that Bernanke did intend to directly threaten Lewis.

It was Issa who said on television that Bernanke was engaged in a “cover-up” to disguise his actions in pushing the merger. Great claims require great proof. And Issa didn’t have great proof, just a bit of hearsay.

Yes, there was an email showing that Richmond Federal Reserve President Jeffrey Lacker claimed he told Lewis, after having a long talk with Bernanke, that BofA management was “gone” if it played the MAC threat. But Bernanke said that was a misinterpretation of his chat with Lacker.

So unless there is a transcript of the Lacker-Bernanke chat floating around somewhere, a dead end has been reached. Issa clearly overplayed his hand if what he actually meant to prove was that an outright deception had taken place. (Even if he had a smoking gun and Bernanke was somehow forced to resign, Issa would probably not like Fed Chairman Lawrence Summers any better.)

Then again, perhaps what the Republicans were actually trying to do was to paint Bernanke as an enabler of President Obama’s supposed big government policies. There has been a conservative backlash against the notion of the Fed operating as a “systemic risk” regulator that could serve as a catalyst for government takeovers of financial institutions — or bullying them, as the GOP charged Bernanke with doing in this case.

Of course, another criticism of the Fed as super-regulator would be that such a role would overly politicize the central bank. Indeed, it did seem weird that after grilling Bernanke for three hours and implying that he was lying, one Republican offered up a question about M2 and monetary policy.

Perhaps the one bit of evidence that did come out of the Bernanke interrogation was that having the Fed regulate banks and conduct monetary policy is a bad idea if you care about central bank independence.

For more on politics and the economy, check out James Pethokoukis’ blog at http://blogs.reuters.com/james-pethokoukis/

Comments
3 comments so far | RSS Comments RSS

I for one don’t trust the Congress or the Fed. However Congressman can be voted out or impeached. I think Ron Paul is right, we need a thorough audit of the FED. The FED represents private banking interests, not the interests of the American People. And to think Congress gave up their power to print and control money to the FED 100 years ago.

Posted by Anubis | Report as abusive
 

Did anyone have the corage to ask Ben why the Fed is taking shares in AIA and Alico. Maybe because AIG can’t sell these units on the market and is bailing them out again but making it look like AIG is paying down its loan. The US taxpayers are being taken for a ride again.
Suggest they ask for a independent auditor to value the worth ofthese units. Wonder if they are solvent ????

Posted by gd | Report as abusive
 

“Of course, another criticism of the Fed as super-regulator would be that such a role would overly politicize the central bank. Indeed, it did seem weird that after grilling Bernanke for three hours and implying that he was lying, one Republican offered up a question about M2 and monetary policy.

Perhaps the one bit of evidence that did come out of the Bernanke interrogation was that having the Fed regulate banks and conduct monetary policy is a bad idea if you care about central bank independence.”

Independence is a loaded word James used in this context.
Despite the ‘appearances’ before congressional leaders
The Fed is not simply independent… it is autonomous.
Former Chairman Greesnpan declares it during an interview
with Jim Lehrer on PBS video HERE: http://www.youtube.com/watch?v=ol3mEe8TH 7w

Chairman Bernake alludes to this independent power, that rightfully
belongs only to our government, in his testimony on video HERE:
http://www.youtube.com/watch?v=rjULF_Xg6 Ps

The seeds of economic collapse we are confronting today were planted long ago. M.W. Walbert masterfully describes the nature and scope of our nations
National Banking system in his 1899 treatise titled : “The Coming Battle”.
PDF HERE: http://www.inlibertyandfreedom.com/PDF/B ankingSystem.pdf

 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •