28 January 2010

Well, All Signs Point to a Senate Appointment of Ben Bernanke Soon

The current whip count has more than 50 Senators voting for him, and because Wall Street wants him, it appears that arms are being twisted in the Senate to get Senators who vote against him to vote for cloture, because, I guess, a stimulus package to reduce unemployment, or a fix to America's broken healthcare plan, both of which required 60 votes to clear the Senate are less important than reappointing Wall Street's lapdog at the Federal reserve.

Paul Krugman nails it in one sentence
I can hardly think of anything more calculated to solidify the view that Wall Street doesn’t have to play by the rules that apply to everyone else.
We have had reports of a number of Senators, including Barbara Boxer, who now appears to have a contentious reelection bid ahead of her.

I think that the two are tied together: Voting for Bernanke is voting for Wall Street, and your opponent can make hay of it.

Harry Reid took a slightly lower key approach, announcing his support for Helicopter Ben late on a Friday evening, so it would not get much press, and the wording is intended to make it sound conditional (it's not). Faint praise indeed.

FWIW, if you vote for cloture, your opponent will make just as much hay of it.

Interestingly enough it is the arguments for his reappointment that make the best argument against his reappointment.

For example, we have a story saying that a Bernanke defeat would rattle Wall Street and so might precipitate a double dip recession.

It's wrong on a number of levels, not the least of which is that we are going to have a double dip recession anyway, because, between new defaults in residential and commercial real estate and the increase in oil prices, the so-called recovery that we have seen won't happen.

The bigger point though is the reason that Bernanke leaving the post would rattle the financial markets is because that they feel that if they screw up royally, then Bernanke will bail them out by pumping money into the system or slashing rates.

Wall Street is looking at a "Bernanke put," which much like his predecessor's "Greenspan put," (both described at the same link) create moral hazard and encourage risk taking.

It's pretty clear that Ben Bernanke is aggressively lobbying Senators to get reappointed, see his promises of transparency in the Federal Reserve that he made in a meeting with Dick Durbin, but it is just as true that all the moves toward transparency and consumer protection will end once he is reappointed and the audit bill is killed.

At this point, I think that the only chance that he won't be reappointed lies with the accusations by Senator Jim Bunning and Darryl Issa that Bernanke is lying about his involvement in the AIG fiasco, and relying on those two lying chowder-heads is not something that I am particularly sanguine about.


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