AUGUST 26, 2009
Embattled Federal Reserve Chairman Ben Bernanke has been nominated to a second term even though he’s used his office irresponsibly by sticking U.S. taxpayers with billions of dollars in bad investments, keeping the recipients of trillions of dollars in lending secret and threatening a sinking bank’s chairman.
During his first term, Bernanke actually jeopardized the Federal Reserve’s independence and the central bank’s main mission to keep inflation in check. He was embroiled in a scandal involving Bank of America’s acquisition of failing Merrill Lynch and was accused of threatening to oust Bank of America’s Chief Executive if the bank didn’t go through with the deal. The government ultimately gave Bank of America a $20 billion rescue package.
This sort of aggressive meddling into the private sector subjects the central bank to the kind of political pressure it’s supposed to resist to fulfill its mission. Congress created the Federal Reserve in 1913 to maintain stability in the nation’s financial system. Strong arming a major institution and threatening its CEO to stay quiet about the problematic plan is probably not what lawmakers had in mind.
Bernanke has also worked diligently to keep agency records from going public, though a court handed him a spanking this week. A Manhattan federal judge ruled in favor of a news agency, saying that the Fed must identify the companies in its emergency lending programs. The central bank had argued that loan records aren’t covered by public records laws because their disclosure would harm borrowers’ competitive positions.
The news agency sued, claiming that U.S. taxpayers need to know the terms of Fed lending because the public became an involuntary investor in the nation’s banks as the financial crisis worsened and the government handed out mega loans and capital injections.
Judicial Watch also had to take legal action to obtain crucial documents about a Treasury Department meeting in which major banks were coerced to allow the government to take $250 billion equity stakes. The documents confirm former Treasury Secretary Hank Paulson told the CEOs of nine major banks that they must allow the government to take equity stakes in their institutions. They also reveal that Bernanke along with Obama Treasury Secretary Tim Geithner and Federal Deposit Insurance Corporation (FDIC) Chairman Shelia Blair co-hosted the meeting with Paulson.
Yet in re-nominating Bernanke this week, President Obama said that he has led the Fed through the one of the worst financial crises that this nation and this world have ever faced. The president added that Bernanke approached a financial system on the verge of collapse with calm, wisdom, bold action and “outside-the-box” thinking that has helped put the brakes on our economic freefall.
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