Free Market Fundamentalist Opinion

Bailing Out Bernanke

In the coming days, the United States Senate will vote on whether or not Ben Bernanke will go on to serve as Chairman of the Federal Reserve for another term. Some legislators are skeptical.

Senator Jim Bunning of Kentucky said Tuesday on CNBC that Bernanke’s own staff recommended against bailing out insurer AIG in September 2008 and that he subsequently tried to cover that up. Treasury Secretary Timothy F. Geithner quickly came to Bernanke’s defense, stating that AIG had to be saved in order to prevent a “catastrophic” blow to the American economy. According to Geithner, the goverment’s intervention in the financial market has created a system that is stabler and in a better position to provide the credit needed for a recovery. Evidently, we are to assume that were it not for Washington, even more businesses would be craving loans right now.

House Republican Darrell Issa of California, who has been investigating the AIG bailout, claimed that a whistleblower informed him of “troubling details” of the Fed Chairman’s role in the process. Chris Dodd of Connecticut, a Democrat and Chairman of the Senate Committee on Banking, is having none of it. Bernanke has done “a very good job,” said Dodd on Monday. “And but for his work, we would be in a very different position in this country today.” The senator admitted that it’s “hard to prove a negative,” but didn’t hesitate from warning that “our entire financial system might have collapsed but for [Bernanke’s] leadership.”

Senators from both parties set to confirm Bernanke for a second term credit him with averting a Second Great Depression. His actions, they argue, outweigh what blame he deserves for causing the financial meltdown in the first place. The Fed was in part responsible for the crisis but Bernanke refuses to admit it. According to his supporters however, the American people should be thankful for he could have done much worse.

Senator Bunning has asked Dodd to subpoena emails and other documents that prove him right. Bunning and other committee members have been allowed to review the documents in question at the Federal Reserve already but are bound by confidentiality from revealing their contents. Whether Dodd will oblige before the vote, if at all, remains to be seen.

With about forty senators lined up already to confirm Bernanke, it seems likely that the man will remain in place for another four years to come, in spite of his shared responsibility for today’s recession and regardless of whether or not bailing out AIG and banks was necessary to begin with.