Bernanke Seeks Second Term As Fed Chief
RENEE MONTAGNE, host:
Ben Bernanke is looking to start a second term as chairman of the Federal Reserve. He is expected to be confirmed, but not before a grilling on Capitol Hill. He's there today for a hearing about his nomination, and Bernanke is likely to get tough questions about the economic upheaval of the last year and about the very powers that the central bank now possesses.
Congress has been busy rewriting the financial regulatory system and many of the proposed changes involve the Federal Reserve. NPR's Audie Cornish reports.
AUDIE CORNISH: Congress and the Federal Reserve have always been fair-weather friends.
Professor ALAN BLINDER (Economy, Princeton University, Former Federal Reserve Vice Chairman): Since the founding of the Fed, in Woodrow Wilson's time, there have been ups and downs.
CORNISH: Princeton Economist and former Federal Reserve Vice Chairman, Alan Blinder.
Prof. BLINDER: There a period when the Fed is riding high, that's usually when the economy is doing well; and there have periods in which the Fed is seriously in the doghouse, and that's usually times in which the economy is not doing well. And this is one of those times.
CORNISH: The central bank is charged with managing the money supply with an eye toward low inflation and maximum employment. Many economists and financial industry types have nothing but praise for the moves Chairman Bernanke and the other regulators took last year to save the financial system. But it's a different story on Capitol Hill, where the central bank has been taking the hardest hits - literally, left and right.
Senator BERNIE SANDERS (Independent, Vermont): People are disgusted with the greed and irresponsibility of Wall Street. They're wondering and asking where was the Fed; where was Chairman Bernanke?
CORNISH: That's Senator Bernie Sanders, an Independent from Vermont. He's moved to block Bernanke's reappointment. And here's Republican Congressman, Ron Paul, from Texas.
Representative RON PAUL (Republican, Texas): Bubbles come from inflating the money supply, lower interest rates, malinvestment, too much debt. The source of all this mischief comes from the Federal Reserve, and who suffers? The consumer.
CORNISH: Paul wrote the book on hating the Fed. No, really, it's called "End the Fed." Now, he's managed to get a provision that allows government auditors to review the Fed's interest rate decisions attached to the new financial overhaul legislation. Paul has tried for similar legislation for years. This time, Democrats and Republicans eagerly signed on.
Mr. DOUG ELLIOTT (Fellow, Brookings Institution): Because politically, right now, if you're an elected representative, what you want to do is be yelling about the bailout and showing that you're mad as heck and blaming anybody who had anything to do with it - and the Fed is the sitting duck in terms of that.
CORNISH: Doug Elliott is a former investment banker and now a fellow at the Brookings Institution.
Mr. ELLIOTT: Many of the things that were done to crack the financial crisis were done at the Fed because it's more insulated from politics. But Congress, understandably, doesn't like to find that there's a fourth branch of government out there that can deploy a trillion dollars in these credit activities without having any of Congress's okay.
CORNISH: Meanwhile, in the Senate, Banking Committee Chairman Chris Dodd wants to take away the Federal Reserve's regulatory powers over banks and its consumer protection duties.
Senator CHRIS DODD (Democrat, Connecticut, Chairman, Banking Committee): If you look at 20 of the major central banks in the world, they don't end up cluttered up with a lot of other responsibilities. And so that's really my motivation. This isn't about being punitive or anti-Bernanke or anything else. It's about getting them back to doing what they do best.
CORNISH: And the debate over what the Federal Reserve does best will be front and center as Chairman Bernanke takes the hot seat before the Senate Banking Committee today.
Audie Cornish, NPR News, the Capitol.