BB’s effort to be the charming professor has failed. Only a fifth of the public supports his renomination. It’s now almost gospel in the GOP (at least outside DC) that the Fed should be abolished. And Democrats are picking their spots for attacks, such as Dodd’s idea for a single regulator and Frank’s idea to neuter the regional bank presidents.
The Bernanke confirmation hearing should be a great show, especially after BB’s “speaking truth to power” WaPo op-ed where he went all Michale Corleone on Fed critics: “Senator? You can have my answer now, if you like. My final offer is this: nothing. Not even the Fed audit bill, which I would appreciate if you would kill personally.” Former Feddies are split on whether that was the right move or if he should have been more conciliatory ….
From The Hill:
Sen. Bob Corker (Tenn.), a GOP member of the banking committee holding hearing on Bernanke’s nomination to a second term in charge of the Fed, said he wasn’t sure yet whether the chairman had the votes on the Banking committee or in the Senate as a whole.
Ron “End the Fed” Paul:
If you want to be a strict constitutionalist, there’s a lot more defense of having Congress involved with defending the value of the currency than delivering this responsibility over to the Fed.
A classic from David Goldman:
The crystal-meth monetary policy at the Fed makes everyone feel better, until they don’t. The nonstop rise in the price of dollar hedges tells us that it can’t last forever. Large balance sheets attached to the Fed’s money pump can show profits, and the price of spread assets (as PIMCO’s Bill Gross keeps emphasizing) is stupid rich. But at the capillary level, through, the economy is dying and gangrene is setting in. … It isn’t just the 17.5% broad-measure unemployment number that we should worry about, but the massacre of smaller businesses, who are concentrated in the most vulnerable sectors: real estate, construction, and retail. Retail sales may get a temporary shot in the arm from cash for clunkers, and a combination of tax credits and (de facto) subsidized mortgage rates may hold up the bottom of the housing market for a short time. But today’s data show how fragile these matters are.
The great David Goldman. First on the US asset bubble:
BOTH bond and stock prices are driven by the dollar. 17.5% unemployment by the broad measure keeps wages down and keeps the CPI low, despite the surge in commodity prices, while the cheap dollar makes US assets a bargain. Well, not exactly: the enormous reserve growth on the part of Asian central banks means that the Treasury’s debt-buying program has been outsourced to America’s Asian trading partners! No-one dares pop the bubble. It’s like what Woody Allen said about death. He wasn’t afraid of it; he just didn’t want to be there when it happened.
I think Henry Kaufman (in the WSJ) accurately outlines the public policy choice when it comes to financial reform: heavily regulated monster banks vs. a more decentralized, somewhat less regulated financial system TBTF creates a need for heavy regulation and less economic efficiency.
The instant analysis on Senator Christopher Dodd’s aggressive financial reform plan is that it’s more about getting him re-elected than getting a bill through the Senate.