by Caitlin Kenney


The good stuff starts at about 3:32.

Federal Reserve chairman Ben Bernanke testified on Capitol Hill today, and afterwards faced some sticky questions from members of the Senate Banking Committee, like this one from Republican Senator Bob Corker of Tennessee:

It seems to me that this has been creating this sort of "dead man walking," sort of zombie-like banking scenario, and while I have been not using these words out around, it seems to me that what you have explained is a creeping nationalism of our banks. I mean, in essence many of them don't have appropriate capital. You are going to stress test them, which means make them reserve up properly, which they should do, and I applaud that. And then you are going to provide the public funding to meet that capital requirement. So I don't like saying things like this, and squirmed a little bit when I was asked about Chairman Dodd's comments about nationalization but in essence this is a form of creeping nationalism, right?

Bernanke's response, after the jump.

 

Bernanke replied:

Senator, there are two sides to this. One side is providing the capital, which they need to have in order to provide credit to the economy, which is essential. But we're not just handing them this capital, saying, "Do your thing." We also have on the other side the supervisory oversight, the TARP oversight to make sure that they are not just sitting around, but that they are taking the steps necessary to clean themselves up, get themselves straightened out so that they will be profitable in the future. At that point, private capital will come in and public capital can go out. As I was saying before, the best sign of success will be when the government can start taking its capital out or the banks can start replacing the public capital with private sector capital. That's what we are aiming for.

That answer didn't satisfy Corker, who continued to push Bernanke:

What I hear you saying today — again I'm not being critical, I might be later but I'm just observing right now — is that we're going to get them [to] sort of take their medicine, we're going to go in and make them reserve up for these accrual loans that we know is where the next huge hole is, but we're going to give them public dollars. I don't, I mean that, to me, and I certainly have been around that long here, but that to me is nationalization. I mean, that, that..I would like for you to give me a term to use as I leave here as to what we would call that.

Bernanke:

Call that a public-private partnership. It's not nationalization, because the banks would not be wholly owned or probably not even majority-owned by the government. The government would be a shareholder along with the private shareholders.