President Obama nominated Fed Chairman Ben Bernanke for another four-year term on August 25, “because of his background, his temperament, his courage, and his creativity,” in fighting the financial crisis that is now entering its third year. The President cited the way Bernanke tackled, “a financial system on the verge of collapse with calm and wisdom; with bold action and out-of-the-box thinking that has helped put the brakes on our economic freefall.”
House Financial Services Committee Chairman Barney Frank (D-Mass.) said he would “strongly support” the nomination. But the nomination is already controversial, in part because Bernanke was the Fed chairman for 18 months before the markets really began to unravel, in mid-2007. He didn’t seem to recognize the looming catastrophe.
As Bernanke said in a May 2007, speech, he believed that the damage to the economy resulting from subprime mortgages, which were even then starting to melt, was “limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”
Senator Bernie Sanders (I-Vermont.) said Bernanke “did nothing to move our financial system onto safer grounds,” according to Huffington Post writer Sam Stein in his August 25 post, “Sanders Rips Bernanke Nomination: ‘He Was Asleep At The Wheel.” Morgan Stanley Asia Chairman Stephen Roach skewered the nomination as well, in an opinion piece in the Financial Times, “The case against Bernanke.” Surely there will be more to come in confirmation hearings once Congress is back in session.
Comments? Please send them to email@example.com. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.