Dean Baker on Bernanke

Bernanke: He Didn't Just Miss the Housing Bubble

First, he misled Congress last fall to help gain quick approval of the TARP. He told Congress that the commercial paper market was shutting down, so that non-financial corporations could not raise the money needed to pay their bills and meet their payrolls. In fact, the Fed had the ability to prevent a shutdown of the commercial paper market by directly buying commercial paper. Bernanke announced plans to establish a special lending facility to buy commercial paper the weekend after Congress approved the TARP.

Bernanke has also chose to keep all of the Fed's lending secret. While anyone can go to the Treasury's website and find out which banks received money from the TARP and under what terms, Bernanke has refused to make information on Fed's lending available even to members of the relevant congressional oversight committees.

Finally, Bernanke has allowed the distinction between commercial and investment banking to be obliterated. After Goldman Sachs became a bank holding company, Bernanke has allowed it to continue to operate as an investment bank. This means that it has effectively gambled with the FDIC's insurance fund money. Even proponents of the repeal of Glass Steagall insisted that they would never allow this sort of mixture of government insured deposits and speculative investment banking.

For these reasons, even some people who don't think that Bernanke's responsibility for the greatest economic disaster in 70 years disqualifies him for reappointment do not want to see him get another term as Fed chair.

Though I want to point out that Baker, at Netroots Nation last week, said he should probably be reappointed as Larry Summers would be the likely choice to take his place--and Baker thinks he is even more to blame for the crisis...

Posted via email from Jim Nichols