This came via e-mail from a legitimate source:
As a former staffer for one of these Senators [on the Banking Committee], I’ll just point out the obvious: most of them have their fingers in the wind right now. they’re leaning to confirm BB, because they don’t want to be out on a limb, and there’s a lot of talk coming from Wall Street that continuity is absolutely necessary to maintain investor confidence, and that BB is critical in this regard. On the other hand, they recognize that the Fed is very unpopular.
If they see signs of strong sentiment against the Fed, they may vote against him, but this is all about politics right now.
As an aside, the Fed is kind of asking for this by pushing so hard to be the central regulator. As a rule, central banks get to be independent, opaque, and imperious towards the people; primary regulators do not.
Surprised that all the genius economists at the Fed aren’t recognizing this basic dynamic.
Notice several key messages:
1. As with the TARP, the threat is that if action is not taken, the markets will go to hell. With the TARP, the markets went to hell after its passage anyhow. If the markets are significantly misvalued as some feel (Roubini, John Hussman, to name a few), they will correct. If confirming or not confirming Bernanke is part of this dynamic, all it will affect is the timing, not the outcome.
2. This notion of Bernanke being “critical” further suggests that Wall Street believes or knows he has and will manipulate markets on their behalf. Of course, Bernanke did so in an explicit way with the $1 trillion Treasury/Agency market intervention that started in March and is tailing off now. And of course, there has been the raft of special facilities, but those are supposedly being wound down now. Has there been even more, as some have charged, than what has been made public?
3. As an aside, this also confirms that at least some of the media is being spun successfully, as our post on Bloomberg’s unduly reports on Bernanke shows. That story said the confirmation is a done deal; this and other reports say there is a real possibility he could be nixed.
4. Most important, this says your action can make a difference. The big issue here is not the financial markets but the real economy. Bernanke was unwilling to intervene in markets, namely the subprime/housing bubble when it would have hurt Wall Street and saved us this mess. He (and Paulson and Geithner) falsely sold the bailouts on the idea that they would get lending going and trickle down the little guy. But that was false, unemployment is rising, the banks are not lending. Bernanke not only has no plan B, and more important, he has NO INTEREST in a plan B, such as really cleaning up the banks, which would be painful short term but would set the foundation for a recovery. We are now on our way to Japan style malaise.
PLEASE call or e-mail your Senator if you haven not done so, particularly if he is on the Banking Committee.
See here for contact info. Thanks!