A Few Questions for Ben Bernanke 25 August, 2009Posted by David Anderson in Economic Policy.
Chairman of the Federal Reserve Ben Bernanke has been nominated for a second term. He has a 99% chance of confirmation allowing for a heart attack or complete collapse of the economy. That does not mean he should not be asked to justify a few policies.
The Federal Reserve is paying interest on excess reserves which discourages lending. Then it acts in extraordinary ways to try to pump money into the system such as by purchasing commercial credit. If it went back to not paying interest on excess reserves, the market would correct itself. Why are taxpayers borrowing money at interest to loan to the banks which then do not have to put that money into circulation because they can have a risk free investment where they get paid interest to keep excess reserves (beyond what is required to insure solvency) in the proverbial vault?
It would be nice for him to justify all of the new regulatory powers he requests step by step. The Fed is already the most powerful economic institution in America. Giving it unchecked power directly over the non-banking part of our economy gives a private stock holding corporation direct regulatory enforcement powers.
Who is more likely to be right the CBO or the OMB when it comes to unemployment numbers? The CBO is projecting an average of 9.8% unemployment for next year.
Finally what level of disclosure should the Fed give to the public. There is a move to audit the Federal Reserve. The Chairman opposes it. Fine, what is his counter proposal. We are being asked to give unprecedented powers to a privately held corporation that we don’t even know who all the stockholders are let alone have ever seen its books. Can we at least see the tax money that goes in and leave the rest private?
The good news for the Chairman is that I am not on any Senate committees. It is not that he can not easily answer these questions. It is that he does not desire to answer them. I hope at least one person gives him the opportunity.