MacroScope

Bernanke’s Senate tone not that of Fed Chairman seeking third term

February 26, 2013

Federal Reserve Chairman Ben Bernanke may be keeping quiet about his future plans, but he sure doesn’t sound like someone planning to seek Senate support for a third term at the helm of the U.S. central bank.

In unapologetic and sometimes testy exchanges before the Senate Banking Committee on Tuesday, the Fed chief defended his record and dismissed one Senate critic in unusually blunt terms.

“None of the things you said are accurate,” Bernanke told Bob Corker, a Republican senator from Tennessee, who accused the Fed of deliberately starting a global currency war and of printing money to bail out big Wall Street banks.

Bernanke’s term expires in January 2014, and he is widely expected to step down at that point and return to private life. However, he has never said so publicly.

If President Barack Obama decided to nominate him to a third four-year term at the helm of the Fed – and Bernanke agreed to serve – he would require Senate confirmation. If that were the case, he might be expected to go out of his way to disguise irritation with Senate questions designed to get under his skin, hewing to the traditionally circumspect demeanor of a Fed chairman delivering congressional testimony.

Instead, Bernanke confronted criticism head-on and was particularly dismissive of the suggestion that controversial policy actions he has championed were risking inflation, in a statement that itself sounded designed for his legacy.

“You called me a dove. Well, maybe in some respects I am, but on the other hand, my inflation record is the best of any Federal Reserve chairman in the post-war period, or at least one of the best, about 2 percent average inflation,” he said. As it happens, the Fed targets 2 percent inflation.

Bernanke, a Republican who was appointed by President George W. Bush and re-appointed by Democrat Obama, faced fire from both sides of the aisle during his two hours of testimony.

Elizabeth Warren, a fierce Wall Street critic who helped set up Obama’s Consumer Financial Protection Board, called him out over big banks who she said continue to enjoy a massive market subsidy because they are still viewed as too big to fail.

Bernanke flatly rejected her contention that the Fed would not wind down big banks if they got into trouble and said that market perceptions were wrong.

“The subsidy is coming because of market expectations that the government would bail out these firms if they failed. Those expectations are incorrect,” he said.

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