Senators from both sides of the isle
took aim at Ben Bernanke Thursday, criticizing him for helping both inflate the housing bubble and mishandling its aftermath.
"You are the definition of a moral hazard," Sen. Jim Bunning (R, Ky.) told Bernanke. "I will do everything I can to stop your nomination and drag out this process as long as I can."
But the Fed chairman has the support of Senate Banking Committee Chairman Christopher Dodd (D, Conn.) and is widely expected to win reappointment.
That would be a mistake, according to Brian Wesbury, chief economist at First Trust and author of It's Not as Bad as You Think.
"If I were a Senator I would vote not to reconfirm Ben Bernanke," Wesbury says. "And it really isn't necessarily about what's gone on in the past six months but literally what's gone on in the past 6 or 7 years."
Like many, Wesbury says Bernanke must share some of the blame for the Fed's ultra-easy monetary policies that followed 9/11 and the bursting of the tech bubble. As a member of the Fed's board of governors, Bernanke provided the intellectual rationale for the 1% fed funds rate the Greenspan Fed kept in place for more than a year, starting in 2003.
"The Fed was at the heart of our housing bubble and I don't think Ben Bernanke has come clean about that," he says. "Until he does, I don't think we're going to resolve these problems; we will continue to have them over and over and over again."
In addition to not admitting the Fed's role in the housing bubble - Bernanke has cited a "global savings glut" - "now they've gotten even more easy," Wesbury laments, suggesting Bernanke has failed as Fed chairman judging by the steep rise in the price of gold.
"The Fed has baked a lot of inflation into the cake," the economist says. "That's what commodity prices and the weak dollar are telling us. They need to be pulling back right now."
Unlike some other of Bernanke's critics, Wesbury does not, however, advocate getting rid of the Fed. Rather, he believes the Fed should adopt some specific inflation targets like the ECB, or return to the gold standard, rather than leaving monetary policy to the whims of "a bunch of people at the Fed who make major mistakes."
Yahoo Finance
-flynn
