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Profile: Ben Bernanke
Ben Bernanke was a participant or observer in the following events:
After President Bush and US Treasury Secretary Henry Paulson push through a long-sought change in how bank mergers are taxed, Bloomberg News sues the Federal Reserve for failing to reveal loan recipients. The change will deprive US taxpayers of as much as $140 billion in tax revenue. As the economy continues its downward spiral into what is called the worse economic crisis since the Great Depression, sources say that a late September $700 billion bailout is “a quiet windfall for US banks.” [Washington Post, 11/10/2008] The legality of Treasury-negotiated equity deals for many US banks is questioned by tax attorneys, as well as nearly $2 trillion that Ben Bernanke of the Federal Reserve handed out in emergency loans before the $700 billion Troubled Asset Relief Program, or TARP, was enacted (see October 3, 2008). The Fed refuses to reveal which corporations received loans, or what collateral has been presented. Sources say that this secrecy is a legal violation. The Federal Reserve’s lending is significant because the central bank has stepped into a rescue role that was also the purpose of the TARP bailout plan, although without safeguards put into the TARP legislation by Congress. Total Fed lending topped $2 trillion for the first time and has risen by 140 percent, or $1.172 trillion, in the weeks since Fed governors relaxed the collateral standards on September 14. The difference includes a $788 billion increase in loans to banks through the Fed and $474 billion in other lending, mostly through the central bank’s purchase of Fannie Mae and Freddie Mac bonds. [Bloomberg News, 11/10/2008; AlterNet, 11/14/2008]
US Federal Reserve Chairman Ben Bernanke tells a Senate committee that having to rescue the insurer AIG made him “more angry” than any other episode during the financial crisis. “AIG exploited a huge gap in the regulatory system, there was no oversight of the financial products division,” Bernanke says. “This was a hedge fund basically that was attached to a large and stable insurance company.” In addition, on this day stock in AIG closes at 43 cents. [Bloomberg, 3/5/2009]
In a speech to the Tulsa Chamber of Commerce, Federal Reserve Bank of Kansas City President Thomas Hoenig declares that US banks’ ability to remain viable during a deeper recession—while undergoing federal government stress tests—demonstrates that most don’t need more taxpayer money. “Although the United States has several thousand banks, only 19 have more than $100 billion of assets,” Hoenig says. “After supervising authorities evaluate their condition, it is likely that few would require further government intervention.” Designed to demonstrate how much extra capital banks may need to survive a deeper economic downturn, the stress tests are to conclude by April 30, 2009, with the 19 biggest banks’ test results to be disseminated to President Barack Obama in meetings with his economic team. Hoenig reiterates his view that the government shouldn’t prop up failing financial institutions but take them over temporarily and wind them down, as with the 1984 takeover of Continental Illinois National Bank & Trust Co. “I encourage Congress to enact a new resolution process for systematically important firms,” he says. “There has been much talk lately about a new resolution process for systemically important firms that Congress could enact, and implement it as quickly as possible, but we do not have to wait for new authority. We can act immediately, using essentially the same steps we used for Continental. An extremely large firm that has failed would have to be temporarily operated as a conservatorship or a bridge organization and then reprivatized as quickly as is economically feasible. We cannot simply add more capital without a change in the firm’s ownership and management and expect different outcomes.” Hoenig declares that calling a firm “too big to fail” is a “misstatement” because a bank deemed insolvent “has failed.” “I believe that failure is an option,” he says. After the government’s fourth rescue of American International Group Inc. (AIG), Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke called for new powers to take over and sell off failing financial companies, and also called for stronger regulation to constrict risks that might endanger the financial system. The Federal Deposit Insurance Corporation has the authority to take over failing firms, and dispose of their assets, but no such authority exists for non-banking financial firms such as a hedge fund or AIG, which have extensive links throughout the banking system. During a Q&A after his speech, Hoenig tells the audience that the Fed must be prepared to make a timely removal of its stimulus to deter a period of high inflation that could be likened to that of the early 1980s. “You cannot wait until you know for sure the economy is recovering,” Hoenig says, adding that “employment growth tends to lag” and may not be the best indicator of recovery. “We will watch every indicator of data that suggests we have a recovery under way.” He also says that if the US manages its economy well, the US dollar should remain the world’s reserve currency. “It is a matter of running your economy properly,” he says. “When the US does that, and I think we will, I think we will remain the largest, most successful reserve currency on the face of the earth.” [Bloomberg, 4/9/2009]
Fox News talk show host Glenn Beck, speaking on his daily radio program, claims that President Obama released his “long form” birth certificate (see April 27, 2011) to distract the press from a press conference being given by Federal Reserve chairman Ben Bernanke. Beck says: “The president of the United States is about to speak shortly [about his birth certificate]. Stations, we will carry it live, live, live on this program. Gas prices, sure, out of control. Middle East, sure, on fire. Ben Bernanke going to give the first press conference for the Fed for the first time in 97 years today, but today is the day the birth certificate is released. You have got to be kidding me. Are we really down to this? We’re really down to this? The birth certificate? I mean, it was bad when we were down to the, you know, Final Four in the brackets, but now we’ve got the birth certificate talk and the president is going to hold a press conference.… [T]his is because Bernanke is speaking today. Watch the markets move today. Why is the Fed—this is what I’ve been trying to figure out—why is the Fed holding a press conference for the first time in 97 years? Why? Something is coming gang, something is coming. Now at the same day, the same time, why is the president of the United States choosing today to release the birth certificate?… There is no way this is being released today for no reason. There’s no way. They’ve had this for two years—three years this has been going on. This rumor was started by Hillary Clinton. This was a Clinton tactic.… So now they’ve had it since Clinton. They could have done this since Clinton. So why?” [Media Matters, 4/27/2011; Media Matters, 4/27/2011] Former Governor Sarah Palin (R-AK) makes the same claim. In a post on her Twitter account, Palin writes: “Media, admit it. Trump forced the issue. Now, don’t let the WH distract you w/the birth crt from what Bernanke says today. Stay focused, eh?” [Media Matters, 4/27/2011]
Representative Michele Bachmann (R-MN) tells a CBS News viewing audience that the Obama administration is lying when it says the US government would default on its loans if Congress refuses to raise the US debt ceiling. Bachmann accuses the Obama administration of using “scare tactics” to push for a debt-ceiling increase. Bachmann has said previously that Congress should not raise the debt ceiling (see April 30, 2011). Treasury Secretary Timothy Geithner and other Obama adminstration members, along with a bevy of economists and financial leaders including Federal Reserve Chairman Ben Bernanke and former Chairman Alan Greenspan, have urged Congress to raise the debt ceiling by August 2 to avoid the US defaulting on its outstanding loans and engendering what many call an economic catastrophe (see May 20, 2011). The US Treasury has used accounting steps, what it calls “extraordinary measures,” to avoid default since the nation reached its debt limit on May 16. The final deadline for the US to raise its debt limit is August 2. Bernanke and others have said that even a brief US default could cause an uproar in the global economy. But Bachmann says she has “no intention” of voting for a hike to the limit, saying instead: “It isn’t true that the government would default on its debt. Because, very simply, the Treasury secretary can pay the interest on the debt first, and then, from there, we have to just prioritize our spending.” Face the Nation host Bob Schieffer asks Bachman: “Experts inside and outside the government say that, if we don’t raise the debt ceiling, we face the United States having to default on its financial obligations. Are you saying these are scare tactics? Or are you saying that’s not true? How can you say that?” Bachmann replies: “It is scare tactics. Because, Bob, the interest on the debt isn’t any more than 10 percent of what we’re taking in. In fact, it’s less than that. And so the Treasury secretary can very simply pay the interest on the debt first, then we’re not in default.… What it means is we have to seriously prioritize. It would be very tough love. But, I have been here long enough in Washington, DC, that I’ve seen smoke and mirrors time and time again.” Bachmann says if elected president, she would end the nation’s deficit problem by making extreme cuts in spending. “I would begin very seriously by cutting spending,” she says. “President Obama, again, he spent a trillion dollar stimulus program that’s been an abject failure. We need to seriously cut back on spending first and foremost, and then prioritize.” Her only recommendation to handle the job crisis is to cut corporate tax rates; she explains: “We have one of the highest corporate tax rates in the world; we need to drop that significantly, so that we have a pro-business, pro-job creation environment. So if we cut back the corporate tax rate, if we would zero out the capital gains rates, allow for 100 percent expensing when a job creator buys equipment for their business, that would go a long way toward job creators recognizing that this is a pro-business environment.” She says that the administration’s health care package, which she calls “Obamacare,” will cost “800,000 jobs.” Schieffer says, “That is data that other people would question,” and she retorts by saying the Congressional Budget Office (CBO), not she herself, has made that claim. A recent analysis by the St. Petersburg Times’s PolitiFact showed that Bachmann’s claim of “Obamacare” costing 800,000 jobs is an “exaggeration” of the CBO’s figures, and is “misleading.” Bachmann dodges questions about the elimination of the minimum wage, which she has advocated since 2005, and the elimination of farm subsidies, from which she and her family have benefited. [CBS News, 6/26/2011]
Entity Tags: CBS News, Alan Greenspan, Barack Obama, Bob Schieffer, US Department of the Treasury, PolitiFact (.org ), Congressional Budget Office, Ben Bernanke, Obama administration, Michele Bachmann, Timothy Geithner
Timeline Tags: Global Economic Crises
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