James Pethokoukis

Politics and policy from inside Washington

Bernanke: I saved the economy. Give me another term

Jul 21, 2009 22:23 UTC

This from Mike Feroli of JPMorgan (bold is mine):

Beyond the issues surrounding the economy and exit strategies, another aspect of the testimony that was of interest was the political angle. Bernanke made his strongest case to date that Fed actions have helped prevent what could otherwise have been an economic catastrophe. His very first sentence of the testimony read “Aggressive policy actions taken around the world last fall may well have averted the collpase of the global financial system.” After listing the notable imporvements in credit markets, he goes on to say “Many of the improvements in financial conditions can be traced, in part, to policy actions taken by the Federal Reserve to encourage the flow of credit.” These statements should be seen in the context of the whithering criticism of the Fed’s conduct of policy, some of that criticism coming from within Congress.

Me: Interestingly, the betting markets dropped the chances of Bernanke’s reappointment to 67 percent, down 3 points.


this persons you all call bernanke and geither paulson they are all people that cause all this mess that where all in and the funny part about all this is that the people that are over this deceitful humans just turn there heads away like nothing happen and how can bernanke tell us about employment when all he is a privatily own banker,you all got to be joking,is this real,this is one big nightmare,will this ever end.

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Bernanke warns Congress

Jul 21, 2009 17:58 UTC

IHS Global on Bernanke’s talk-talk:

Bernanke wanted to send the message that Congress needs to prepare its own “exit strategy” from unsustainable budget deficits. His formal remarks made no mention of a possible second stimulus package (under questioning he said that the idea was “premature”), and he said that policymakers should begin planning “now” to restore fiscal balance. He didn’t offer prescriptions on what to do (whether to raise taxes or cut spending), but said that postponing choices would only make them more difficult. He said that agreement on a sustainable fiscal path could lower long-term interest rates and boost confidence – the implication being that lack of agreement would do the opposite.


HOW can bernanke warn anybody,When he cause all this mess,PEOPLE DON,T know that congress NEVER voted to have this so call name federal reserve,these bankers took this on them self when congress went on HOLIDAY break with no approvel from congress which they think they can make there own laws,AND DID YOU ALL KNOW THAT THESE PEOPLE ARE HOLDING AMERICANS GOLD FROM FORT KNOX AND THEY PRINT OUR MONEY WITH OUR PAPPER AND THEN THIS PEOPLE CHARGE US INTEREST ON OUR OWN MONEY,PLEASE WAKE UP AMERICANS,GET RID OF THESE DECEITFUL PEOPLE.

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The case against Ben Bernanke

Jul 20, 2009 20:11 UTC

My pal John Tamny doesn’t think the Fed chairman deserves a second term for the following reasons

1) Bernanke is too much of a political operator.

2) Bernanke thinks too much economic growth causes inflation.

3) The dollar has collapsed vs. gold during Bernanke’s tenure.

4) Bernanke was a TARP enabler.

5) Zero percent interest rates are  a market of Fed failure.

Bottom line:

Here’s hoping the Obama administration ignores the establishment consensus, and realizes that the job of Fed chairman should be a prosaic, undesirable one, whereby the chairman is humble in his actions with an eye solely on issuance of a stable dollar.

Bernanke’s past and present lust for the job of Fed Chairman signals an expansive vision about what the position entails, and this means he’s unfit for the role, which should have greatly diminished prestige. Indeed, the fact that he covets the position so much tells us all we need to know about his love of status and rank. As Bagehot observed, “such men are dangerous.”


You’re smart. You should have a tv show!

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Thoughts on Bernanke, Lewis and Bank of America-Merrill Lynch

Jun 25, 2009 18:22 UTC

I sat through most of the Ben Bernanke/BofA hearing before having to duck out to do some CNBC. But these are my takeaways

1) It sure would be great to have a transcript of the conversation between Richmond Fed President Jeffrey Lacker and Bernanke that led Lacker having a chat with BofA’s Ken Lewis that then led Lewis to claim he was being threatened.

2) Without #1, there is no smoking gun. Rep. Issa overreached when he said there was a coverup.

3)  Some Dems, particularly Elijah Cummings, indicated frustration with Bernanke’s narrow, legalistic answers.  Bernanke to Lewis was like asking your mechanic if you need new brakes and he says, “I wouldn’t drive the car with these brakes, but that’s me. It’s up to you.” Lewis read between the lines. Bernanke said he should not have, that the Fed was merely outlining the market reaction to BofA trying to scuttle the deal with Merrill.

4)  A three-hour grilling where the GOpers basically accused Bernanke of lying and perjury. And then at the end, a question about M2 and monetary policy. Still think having the Fed as a super-regulator is a good idea?


Having the fed period is a horrible idea.

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America’s high-tax future

Jun 4, 2009 14:04 UTC

Francis Cianfrocca has an interesting post over at Contentions called “Our High-Tax, Low-Growth Future.” Like me, he also saw Ben Bernanke’s testimony yesterday as a harbinger of tax hikes to come:

Since we must scale back fiscal borrowing as we move into the future, there are only two alternatives: to accept far higher levels of taxation, or to accept a U.S. economy that is significantly smaller and slower-growing than it would otherwise have been. (The consequences of the latter, of course,are high unemployment and less material well-being for individuals.)

What would be a logical way to navigate between those alternatives? Adopt a high-tax policy that does as little as possible to burden highly-productive individuals, businesses and capital, thus lessening the impact on the size and dynamism of the economy.

But we already know that the President wants to do exactly the opposite. Faced with an evil choice between much higher taxes and a smaller economy, Obama is on track to give us both.

Why Obama loves Bernanke’s big deficit warning

Jun 3, 2009 20:23 UTC

Ben Bernanke seemed to buy into the “bond vigilante” theory today in his House testimony as an explanation for the recent backup in long yields:

Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance. … These increases appear to reflect concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of flight-to-quality flows, and technical factors related to the hedging of mortgage holdings.

Me: Some folks are interpreting this as bad news of Obamanomics, that deficit fears mean he’ll have to trim back his spending agenda. (I’ve seen plenty of posts about how Bernanke’s warning means he won’t get reappointed in 2010.) But recent history shows that deficit fears often lead to tax hikes (1982, 1990, 1993) and higher taxes are just what Obama needs to pay for “investments” in healthcare, energy and eduction. Here is a bit from a column that should go up later today:

Chatter about budget deficits and fiscal responsibility is exactly what Team Obama needs right now. Here’s why: If you buy the theory of bond vigilantism — that credit markets will force interest rates higher in reaction to unsustainable national budget deficits — then you also have believe the White House will need to raise taxes sharply to pay for all its spending programs or risk a revolt. Indeed, plenty of White House folks, particularly if they worked for Bill Clinton, likely do believe in the theory. Recall that it was Clinton who chucked his investment agenda in favor of a “bond market strategy” to boost growth by persuading credit markets that the administration would balance the books. As Clinton nicely boiled it down, “You mean to tell me that the success of the program and my reelection hinges on the Federal Reserve and a bunch of [expletive] bond traders?”

… And today, Bernanke’s sharp warning contributed to that effort. So not only has Bernanke’s unprecedented monetary stimulus allowed Obama to focus on pushing forward his policy agenda rather than a pure stimulus effort (such as a suspension of payroll taxes), but the weight of his authority is now being used to help persuade Americans that the budget deficit is the Next Scary Problem. In short, Bernanke is “preparing the battlespace” for Obama tax initiatives to pay for Obamacare and who knows what else. What more could one Fed chairman do for a Democratic president?


Pethokoukis, Yes I am sure Bernanke wants a massive tax increase in the middle of a massive recession. Afterall, what spells job increases like a massive tax on income. I do hope Obama takes Pethokoukis’s advice though. It takes a Carter to make a Reagan and 4 years from now we are going to be needing a Reagan big time.

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