Committee Votes for Bernanke Second Term

123jump.com Staff
17 Dec, 2009
New York City

The Senate Finance Committee voted 16-to-7 in favor Chairman Bernanke for a second term. The growing dissent in the committee and among many Senators is not likely to stop his nomination. Lawmakers are increasingly questioning his costly initiatives in tackling the financial crisis.

[R]3:20 PM Washington, D.C. – The Senate Finance Committee voted 16-to-7 in favor Chairman Bernanke for a second term. The growing dissent in the committee and among many Senators is not likely to stop his nomination. Lawmakers are increasingly questioning his costly initiatives in tackling the financial crisis.[/R]

The Senate Finance Committee voted 16-to-7 to confirm the Fed Chairman Ben S. Bernanke for the second term. The vote will now go to the full Senate where his nomination is expected to be confirmed but not without a chorus of dissent.

Twelve Democrats and four Republicans voted in favor of the nomination for the second term. Six republicans and one Democrat, Jeff Merkley of Oregon voted against the nomination.

What is unusual about the current nomination climate is that several Senators are openly critical and vocal about their displeasure with Chairman Bernanke. There is a widespread belief that the Fed operates in a cloud of secrecy and favors Wall Street at the expense of Main Street.

Chairman Bernanke has maintained repeatedly that saving Wall Street is critical to maintain the flow of credit to the small businesses and individuals and but the remedy that he has applied during the current crisis has also been very expensive.

The ranking Republican Senator Richard Shelby of Alabama voted against the nomination and criticized Bernanke starting his role as a Fed governor and Fed chairman. Shelby voted in the favor of Bernanke’s nomination in 2006 and at the time said Bernanke a “superb choice.”

Shelby spoke for many when he said shortly before the nomination that the Fed missed many “clear signals” and “our trust and confidence were misplaced” in Dr Bernanke.

Independent Senator Bernard Sanders of Vermont has voiced his opposition several times about the critical decisions made by Bernanke including stealth bailout of AIG, Fed’s heavy tactics with Bank of America during Merrill Lynch’s acquisition and missing the housing bubble and failing to supervise banks closely.

Senator Sanders’ dissent means that the Senate will require at least sixty votes for the confirmation of Bernanke and not the simple majority. In 2005, Chairman Bernanke was confirmed with a near unanimous vote. Republican Senator Jim Bunning of Kentucky was the lone dissenter.

Senator Bunning on Thursday repeated with a strong voice and deep skepticism and reminded the committee that Bernanke inaccurately predicted that mortgage mess will not affect the economy and the two government lending agencies Fannie and Freddie were “adequately capitalized.”

He went on to say, “From monetary policy to regulation, consumer protection, transparency, and independence, Chairman Bernanke’s time as Fed chairman has been a failure.”


Bernanke had previously stated that the subprime lending is a small part of the housing loans and is not likely to affect the mortgage and housing markets. He had also asserted several times before the crisis that the banks are adequately capitalized and are not expected to be affected by the weakness in the housing market.

But the biggest gripe that lawmakers have against Bernanke and former Treasury Secretary Henry Paulson is related to the TARP funding.

The two had promised the U.S. lawmakers that $700 billion TARP funding will be used to buy toxic securities held by troubled banks and then after the approval and without the Congressional mandate invested directly in banks with no conditions attached.

Republican Senator Kay Bailey Hutchison of Texas voted against the nomination and said that she was misled by how the TARP funding was used.

Lawmakers are also furious that the Fed invested initial $85 billion without the Congressional approval over a weekend in the troubled insurance company AIG.

Republican Senator Bob Corker of Tennessee said that Bernanke made mistakes like every other Fed regulator but he can’t think of any other person who could do a better job and also deal with the holdings in the expanded Fed’s balance sheet.

The committee chairman Christopher J. Dodd of Connecticut who voted in favor of Bernanke nomination and added, “Bernanke must receive credit for the critical role he played in the events of last fall.”

Chairman Bernanke before 2008 was widely respected for his scholarly achievements and mild demeanors and given deferential treatment by lawmakers during public hearings is now increasingly treated with hostile tone and skepticism with his approach.