----- 

~ H.R.1207 ~

317 Co-Sponsors

75% of House

-
~ S.604 ~

31 Co-Sponsors

 ----

Rebels in Senate Place Bernanke Confirmation
Vote on ‘Hold’ & Demand ‘Up or Down’ Vote
on Bill to Audit The Fed

--- 

Liberal Progressives & Conservative Republicans Join in
Unlikely Union, Form Political Alliance Against Central Bank

---------------------------------------- 

Left vs. Right Paradigm Shattered

---------------------------------------- 

   The times, they are a-changing. In an uncharacteristic turn of events, a chairman of the nation’s Central Bank was grilled, not fawned-over by Senators with mouths agape in awe of slick-talk by a self-proclaimed economic soothsayer.

   Instead, current Fed chairman Ben Bernanke was exposed as an economic charlatan when he appeared for his confirmation hearing before the U.S. Senate Committee on Banking, Housing and Urban Affairs. Bernanke has been re-nominated by President Obama for a second four-year term as head banker. Bernanke was sworn-in for his first term in February 2006 after being nominated by President Bush.

   The Fed - our nation’s third attempt at a Central Bank - was created in 1913 and has among its numerous official mandates to achieve maximum employ­ment, stable prices, and moderate long-term interest rates.

   The nation’s first Central Bank, the Bank of the United States, was created in 1791 and died after its 20 year charter expired in 1811, failing to be renewed by the Senate during the administration of President James Madison. The nation’s second Central Bank, the Second Bank of the United States, was chartered for 20 years in 1816 but was done away with through an Executive Order issued by President Andrew Jackson in 1833.

                                      

   Using the price of gold as a barometer to measure the dollar’s strength, since The Fed’s creation nearly 100 years ago the Dollar has lost over 95 percent of its value. (The 1913 price of one ounce of gold was $19. As of press time, December 9, gold was selling for over $1,100 per ounce.)

   In addition to destroying the Dollar, decades of The Fed’s loose monetary policy has transformed the once time-honored American values of ‘thrift and savings’ into one of ‘credit and personal debt.’ Also under The Fed’s leadership the United States economy has been malformed from one based upon industrial production into one whose strength today is driven by consumer spending, consumption of cheap foreign-made goods, and employment growth in government jobs and low-paying retail sales.

   Bernanke’s appearance comes in the shadow of intense congressional scrutiny over the secrecy behind which our nation’s third Central Bank operates. Discontent has been manifested in two pieces of legislation – H.R.1207 and S.604. Both Bills are crafted to remove legal, statutory exemptions enacted in 1978 that prevent a full audit of The Fed by the General Accounting Office (GAO).

   After the December 3 hearing, self-described Socialist, Senator Bernie Sanders (I)-Vermont, along with Conservative Southern GOP Senator DeMint of South Carolina and fellow Republican Senator Jim Bunning of Kentucky, each independently, announced they would block the vote on Bernanke’s nomination by the full Senate until an up-or-down vote was taken on S.604, the U.S. Senate’s version of Republican Representative Ron Paul’s House Bill to audit The Fed.

   Sanders is the sponsor of S.604, and DeMint is one of 30 co-sponsors comprised of 22 Republicans and eight Democrats, to include California’s Senator Barbara Boxer.

The Thursday, December 3 hearing began with an opening statement by committee chair Senator Chris Dodd (D)-Connecticut, who said he backed Bernanke’s confirmation to a second term and thanked him for doing a great job as Fed chair over the previous four-years. “Under your leadership, Mr. Chairman, the Federal Reserve has taken extraordinary actions to right the economy,” said Dodd. 

   In a bizarre twist of logic, Dodd then took a tone not commensurate with his stated support for Bernanke. Dodd scolded The Fed chairman and explained, since 1994 when Congress gave The Fed authority to protect consumers in mortgage markets, that the Senate has been “frustrated in our efforts to get the Fed to address predatory lending.” Dodd added The Fed also “failed to develop meaningful mortgage regulations until after the housing bubble burst,” under Bernake’s stewardship.

   Dodd’s discord to his previously announced personal preference for Bernanke continued when he further criticized The Fed chief. Dodd said that The Fed, under Bernanke’s leadership, had “other lapses in consumer protections, with the Fed doing little over the years to protect users of credit card and checking accounts from abusive company practices.”

   Dodd then called for “overall reform” of The Fed and said the Central Bank “failed to rein in excessive risk-taking by some of the largest holding companies which it supervised.” Dodd added that many of the firms whose “irresponsible actions contributed to the crisis ultimately required a taxpayer funded bailout and did so under The Fed’s [Bernanke’s] watch.”

   The New England Democrat then strangely closed his opening statement by congratulating Bernanke on the work he had done then yielded to Senator Shelby (R)-Alabama, the Ranking Minority member.

   In his opening statement Shelby said The Fed’s policy of keeping interest rates “far too low for too long” after the 2001 Recession encouraged the next bubble, the housing bubble, along with an atmosphere for excessive risk-taking.

   Although the Southern Senator noted Bernanke was a member of The Fed’s Board of Governors during that time-period, he placed part of blame on the Congress for enacting unwise housing policies that encouraged people to purchase homes they could not afford.

   Shelby did not note his party, the Republican Party, and its failure to address that issue during the six years the GOP had the White House along with a majority in both Houses of Congress under President George Bush.

                                       Fed Chairman Ben Bernanke


   Ignoring The Fed’s post-collapse policy of designating Wall Street as ‘Too-Big-To-Fail’ - thus deserving of massive, multi-billion dollar, taxpayer financed bailouts while regular Americans, The People on Main Street, were considered ‘Just-the-right-size’ for failure – Bernanke, in his opening statement thanked his colleagues in the Federal Reserve System for never losing sight of “the importance of the work of the Federal Reserve for the economic well-being of all Americans.”

   Bernanke added that The Fed’s task was “far from complete” and told the committee he remained “committed to its mission to help restore prosperity.” The nation’s head banker claimed the Federal Reserve’s actions since September 2008 “have contributed substantially to the significant improvement in financial conditions” to include improvements in the “commercial paper market.”

   To bring his opening remarks to a close, the Central Bank chairman said the structure of The Fed ensured that Fed policymaking was “informed not just by a Washington perspective, or a Wall Street perspective, but also a Main Street perspective.”

   In questioning, Democrat Dodd defended a proposal before the committee to remove The Fed’s authority to act as a bank supervisor - a proposal opposed by Bernanke - and asked The Fed chairman to explain his objection.

   Bernanke said it would be “a mistake for the country” if Congress stripped The Fed of its role of active bank supervision because The Fed, and only The Fed, had “unparalleled expertise” in monetary policy, along with the ability to “maintain financial stability.”

   Alabama Republican Senator Shelby asked Bernanke if he believed The Fed has done an adequate job under his leadership since 2006 supervising and regulating the holding companies that collapsed in September 08. Bernanke replied, “As I said before, there are failures all through the system.”

   Democrat Senator Johnson of South Dakota asked Bernanke to explain how S.604 would change how the Central Bank operated and Bernanke said there was a “misunderstanding of the word ‘audit’,” by The People to mean a “financial term,” and then went on to acknowledged Congress deserved to have appropriate “oversight” of The Fed.

   Outside of monetary policy, Bernanke explained, the GAO currently possessed the authority to audit every aspect of Fed activity and said he favored maintaining the status quo because a GAO audit of monetary policy would open to public disclosure the policy materials used by The Fed in their decision-making.

   A full audit would also empower the GAO to interview Fed policymakers themselves, which would amount to “second-guessing” the decision-making of The Fed by The People’s representatives in Congress, according to Bernanke.

   “The Fed’s credibility depends on the market’s perception that we are independent in making monetary policy decisions and we will not be influenced by short-term political considerations,” said Bernanke.

   The Fed chair said if S.604 were to become law, he feared whenever The Fed made an unpopular decision – Wall Street and foreign Central Bank Bailouts – the Congress would demand an audit and full accounting.

   In respect to budget deficits, Bernanke agreed the government could not continue to have annual deficits so large that, as they accumulated, they made the national debt relative to GPD rise indefinitely. With that comment, Senator Bennett (R)-Utah interrupted Bernanke to cite budget numbers reflecting the reality of how little control the Congress actually has on overall federal government spending and obligations, and the resulting dire financial circumstances awaiting the taxpayer in the not-so-distant future.

   As a member of the Committee on Appropriations Bennett explained his committee had control over only one-third of the federal budget – discretionary spending. “The other two-thirds is on automatic pilot,” said Bennett, in reference to “entitlement” spending. “The percentage of what we have control over is going down.”

                                             
                                     Congressman Ron Paul (R)-Texas
                                                    Author of H.R.1207

   The Utah Republican explained discretionary spending was “roughly one-sixth (16.66 percent) of the federal budget,” with one-half of that money dedicated to the defense budget. Bennett then said to Bernanke, “So as you’re commenting on, ‘Gee, we need some fiscal discipline,’ the trajectory is entirely in the other way as mandatory spending takes over.”

   Bennett told Bernanke the level of obligated entitlement spending alone would soon make it impossible for Congress to have any real fiscal discipline, then explained this year’s federal revenues are projected to be $2.2 trillion equaling mandatory or entitlement spending commitments, also at $2.2 trillion.

   “Every single thing we spend money on in government other than mandatory spending, we’ve had to borrow every single dime,” said Bennett to Bernanke.

   Bernanke insisted Congress needed to develop a plan to guide federal government spending toward a sustainable fiscal trajectory over the next few years, and his comment prompted Senator Reed (D)-Rhode Island to ask Bernanke if the trajectory of federal fiscal policy was more appropriate in 1999 and 2000 when the federal government enjoyed a budget surplus.

   Bernanke did not answer the question and instead blamed the Recession of 2001 for returning the federal budget back on the path of perennial deficit spending and justified the current explosion in the annual budget deficit to a record $1 trillion as being the result of last year’s economic collapse - a collapse, Bernanke said, that has “dragged down tax revenues” and is compounded by a federal government “supporting people out of work.”

   Bernanke said the “enormous deficits” of this year and next were not permanent, but cautioned entitlement spending would become a permanent burden if the government failed to address “the entitlement issue and the aging issue.”

   The Rhode Island Democrat explained that the only two ways he knew to reduce budget deficits was either by an income tax rate increase or by cutting spending, and then asked Bernanke if he knew of another way.

   Bernanke said, “Logically, there are other kinds of taxes beside income taxes, and on the spending side, again, Willie Sutton robbed banks because, ‘That’s where the money is,’ as he put it, and the money in this case is in entitlements. Those are the programs which are growing.”

   Bernanke then issued a grave warning to congressional appropriators. “At the rate we are growing, in ten, 15 years, the entire federal budget will be entitlements and interest, and there won’t be any money left over for defense or any of the other activities,” said Bernanke.

   The government’s obligations to an aging society, along with rising health care costs, will be an expensive proposition for taxpayers, explained Bernanke, as he attempted to make clear he was not advocating for unfair treatment of the elderly as a solution.

   Senator Bunning (R)-Kentucky - the lone Senator to vote against Bernanke’s confirmation as Fed chair four years earlier - delivered perhaps the harshest comments of the hearing. He explained he opposed the Bush-nominated Bernanke in 2006, as he does now, because Bernanke intended to continue the economic bubble-making, easy money, boom-bust monetary policy of his predecessor, Alan Greenspan.

   “In your effort to keep filling the punchbowl, you cranked up the printing presses to buy mortgage securities, treasury securities, commercial paper and assets from Wall Street,” said Bunning, who added Bernanke’s selective purchases resulted in profits for his buddies in the financial industry. 

   Bunning told Bernanke he was guilty of continuing Greenspan’s consumer protection policy of not protecting the consumer at all, and also not regulating sub-prime mortgage lending. “Under your watch, every one of the major banks failed, or would have failed, if you had not bailed them out,” Bunning said.

                                
                                       Federal Reserve Building on
                               Grand Ave., in Downtown Los Angeles

   The Kentucky Republican complained to Bernanke that he bowed to the political pressure of both the Bush and Obama administrations to turn The Fed into an arm of the Treasury when he came to the Congress “begging for TARP” money. Bunning noted, to this day, Bernanke still refuses to provide details of The Fed’s purchase of private-sector toxic assets or disclose assistance to foreign Central Banks.

   “You put the printing presses into overdrive to fund the government spending and handout cheap money to your masters on Wall Street, which they used to rake-in record profits while ordinary Americans and small businesses can’t even get loans for their everyday needs,” said Bunning.

   Bunning told Bernanke his problem was that he saw, “every large bank, investment bank, insurance company, and even some industrial companies” as “too big to fail.” He said to The Fed chair, “Rather than making management, shareholders and debt holders feel the consequences of their risk-taking, you bailed them out. In short, you are the definition of a moral hazard.”

   The Conservative Republican Senator then angrily decried the bonuses paid to executives of corporations on the government tit and suggested Fed handouts would have been better spent given directly to the American people to clear their personal balance sheets.

   “The AIG bailout alone is enough to send you back to Princeton,” said Bunning, later adding, “You’re time as Fed chairman has been a failure.” The Senator vowed to block any vote on Bernanke’s nomination, and short of that, drag-out the process as long as he could to stall any vote.

   Bunning did not ask Bernanke any questions during his five minute allotted time and ended his comments by telling The Fed chairman, “Your Fed has become ‘The Creature from Jekyll Island’,” in reference to a book by the same title by author G. Edward Griffin that serves as a primer on the creation of the Federal Reserve System.

   Video of the December 3, Bernanke re-nomination committee hearing is available at the U.S. Senate’s Committee on Banking, Housing and Urban Affairs website: www.banking.senate.gov