What the American people did not bargain for was another four years for one of the key architects of the Bush economy.
Before Mr. Bernanke became the Fed chairman in 2006, he headed the
Council of Economic Advisers for President George W. Bush -- one of the
most conservative presidents in American history. He also sat on the
Fed board of governors from 2002 to 2005. Perhaps more than anyone
else, Mr. Bernanke was in a position to diagnose the impending economic
disaster and take steps to stop it. Tragically, not only did he fail to
prevent the worst economic collapse since the 1930s, he did not even
warn the American people that it was coming until it was too late.
Equally distressing, his actions since the crisis began may leave
taxpayers holding the bag for an even bigger bailout in the future.
A Federal Reserve chairman has four main responsibilities: 1) to
conduct monetary policy in a way that leads to maximum employment and
stable prices; 2) to maintain the safety and soundness of financial
institutions; 3) to contain systemic risk in financial markets; and 4)
to protect consumers against deceptive and unfair financial products.
By any sober assessment, Mr. Bernanke has failed in all four of these areas.
Since Mr. Bernanke took over as Fed chairman, unemployment has more
than doubled and, today, an incredible 17.5 percent of the American
workforce is either unemployed or underemployed.
Not since the Great Depression has the financial system been as unsafe,
unsound, and unstable as it has been during Mr. Bernanke's tenure. More
than 120 banks have failed since he became chairman, despite the Fed's
army of nearly 3,000 bank supervisors with broad powers to maintain the
safety and soundness of financial institutions.
Under Mr. Bernanke's watch, the value of risky derivatives held at our
nation's top commercial banks grew from $110 trillion to more than $290
trillion, 95 percent of which are concentrated in just five financial
institutions. While Mr. Bernanke was asleep at the wheel, Warren
Buffett, as early as 2003, called derivatives "financial weapons of
mass destruction" and warned that they posed a "mega-catastrophic risk"
to the economy.
Mr. Bernanke failed to prevent banks from issuing deceptive and unfair
financial products to consumers. Under his leadership, mortgage lenders
were allowed to issue predatory loans they knew consumers could not
afford to repay. This risky practice was allowed to continue long after
the FBI warned in 2004 of an "epidemic" in mortgage fraud.
After the financial crisis hit, Bernanke's response was to provide
trillions of dollars in virtually zero-interest loans and other
taxpayer assistance to some of the largest financial institutions in
the world. Adding insult to injury, Mr. Bernanke has refused to tell
the American people the names of the institutions that received this
handout or the terms involved. Trillions of taxpayer dollars are at
risk and Mr. Bernanke continues to hide the names!
Further, despite the American people having to spend $700 billion to
bail out huge financial institutions because they were
"too-big-to-fail," Mr. Bernanke has allowed three of the largest
financial institutions in the country to become even larger than they
were before the financial collapse.
In the midst of a horrendous economic crisis that has caused massive
suffering in this country, Mr. Bernanke had the opportunity to force
irresponsible and corrupt Wall Street firms to change their ways. The
chairman could have demanded that Wall Street provide adequate credit
to small- and medium-sized businesses to create decent-paying jobs in
the productive economy. He could have insisted that large bailed-out
banks end the usurious practice of charging interest rates of 30
percent or more on credit cards. He could have instituted a major
investigation of how the financial collapse occurred in the first
place, and held CEOs at those banks accountable.
The American people want a new direction on Wall Street and in the Fed.
They do not want as chairman someone who has been part of the problem
and who has been responsible for many of the enormous difficulties that
we are now experiencing. It's time for a change at the Fed. It's time
for Mr. Bernanke to go.
