Wednesday, January 27, 2010
Isn't it curious that the media reports that if Bernanke is not re-confirmed in the senate that he "will lose his job"? This gives the impression that Bernanke will have to leave the Fed. Not so fast my friends. If not confirmed, he could just go back to being a Fed governor. The governors are appointed to a 14 year term and then the president picks one to serve a four year term as chairman. This is just another indication that the media knows very little about what they report. I was also puzzled as to why Ben Bernanke needed 60 votes to be re-confirmed in the Senate rather than 51. It is because the Senate will debate his confirmation and 60 votes are needed to end the debate. However, when the vote is taken for confirmation it will only require 51 votes to re-confirm. Should he be confirmed? Yes. Why? He has been a sycophant for the Obama administration surrendering Fed independence. Bernanke started campaigning for re-nomination the second Obama got elected. He has given the administration all the liquidity it has needed to expand its spending into the feckless territory. The Fed has loaned money where it has never lent before through establishing all of it lending facilities buying asset-backed securities. It sent billions of dollars to AIG so they could pay off all their big bank creditors rather than have them eat some of the losses. So why re-confirm? Its because the next chairman will be worse. It will be some administration lackey like Larry Summers who will be an extension of the administration and turn the Fed into a branch of the Treasury. However, since if he is confirmed, Bernanke will be in the chairman's seat for four more years. He - and his six Fed governors and 12 reserve bank presidents - can then become more independent and conduct monetary policy for the benefit of the nation rather than the benefit of the president. Why? Because unless this administration starts to slow down spending by attacking entitlements, removing the disincentives embedded in Obama's cap and trade, health care and financial reform agenda, this president won't be in office when Bernanke's next term comes around.