Thursday, December 17, 2009

Bernanke Named Person of the Year But Still Faces Opposition

Whether it was when Congress was working on the stimulus bill in the early part of the year or when the unemployment rate has recently climbed to 10 percent, there is no doubt that economy has dominated the news this year. It’s even played a role in some of the gossip news as the coverage of Tiger Woods personal difficulties has touched on what this will mean for his endorsements and the economics of professional sports. It therefore shouldn’t be too surprising that Time Magazine’s person of the year was deeply involved with economic news. Since Time Magazine is also stressing that this goes to a person who isn’t necessarily a hero but someone who was a driving force behind the news, the selection of Ben Bernanke as person of the year is very understandable.

The timing of this announcement is somewhat interesting as the Senate Banking Committee will be voting today on Bernanke’s nomination for a second term as Fed Chair. Shortly after Time announced that Bernanke had been named person of the year, I received a statement from Sen. Jeff Merkely’s office stating that the senator would be voting against the re-appointment. Now this vote definitely wasn’t in response to Time’s announcement, but does represent how many progressives are disappointed with the role that Bernanke played in bailing out Wall Street.
“For too many years, federal regulators turned a blind eye to signs of an impending financial crisis. Tricks and traps proliferated in the credit card and consumer lending industries. Predatory mortgage loans exploded, fueling an unsustainable housing bubble. Regulators lifted rules requiring banks to keep adequate capital, and a laissez-faire approach to securitization, derivatives, and proprietary trading encouraged excessive risk-taking on Wall Street. As a member of the Board of Governors, Chair of the Council of Economic Advisers, and then ultimately as Chairman of the Board of Governors, Dr. Bernanke supported each of these decisions, failing to take the necessary precautionary steps that could have averted or mitigated financial collapse.

“These failures are very relevant to the future. We need economic leaders who understand that the ultimate goal of economic policies and the key to meaningful economic recovery should be financially successful families, not oversized Wall Street profits.

“Indeed, it should be recognized that although Wall Street prospered in the short-term from reduced leverage requirements, securitization of faulty mortgages, and the explosion of derivatives, Americans did not. The expansion that occurred from 2002 to 2007 became the first economic expansion in which working families were worse off at the end than at the beginning. This is not a path that we can afford to travel again.”
Now Bernanke will face some tough opposition from progressives like Merkely as well as some conservatives who have a different set of disagreements with the Fed Chair, but most pundits agree that he will approved for a second term. What I really hope happens, however, is that Bernanke takes to heart what his critics have to say and truly does make sure that the policy he promotes truly does favor Main Street instead of Wall Street. After all, that is the best way to make sure our economy remains stable and is able to succeed in the long run.

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