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He is a man who either saved the economy or helped to ruin it, depending on your point of view. Now, Ben Bernanke has a chance to spend four more years as chairman of the Federal Reserve. There is little doubt the Senate will confirm him for the job. But as NPR's John Ydstie reports, lawmakers made clear today there is strong disagreement about whether he deserves a second term.
JOHN YDSTIE: Bernanke's most passionate critic during his hearing before the Senate Banking Committee was Kentucky Republican Jim Bunning. Bunning made clear that he thinks Bernanke should be sent packing.
Senator JIM BUNNING (Republican, Kentucky): The AIG bailout alone is reason enough to send you back to Princeton.
YDSTIE: But Bunning didn't leave it at that. He spent his full eight-minute time allotment cataloguing Bernanke sins. First, the chairman's failure to recognize the housing bubble that sparked the financial crisis, and then his participation in the Wall Street bailouts once it hit.
Sen. BUNNING: Where I come from, we punish failure, not reward it. I will do everything I can to stop your nomination and drag out this process as long as I can.
YDSTIE: But the majority of senators, while acknowledging the mistakes that the Fed and Bernanke have made, credited the current chairman with taking actions during the financial crisis that saved the country from another Great Depression, among them was New York Democrat Charles Schumer.
Senator CHARLES SCHUMER (Democrat, New York): Easy to criticize, easy to say it could have been done a different way. But at that moment, action was needed and need a quickly or we would have had financial collapse. And you did act quickly and I hope my colleagues will remember that.
YDSTIE: New Jersey Democrat Robert Menendez asked Bernanke to describe what might have happened if the Fed had not acted.
Senator ROBERT MENENDEZ (Democrat, New Jersey): Give us a sense of what would have happened had we just, let's say, you know, let the markets to do it on their own.
Mr. BEN BERNANKE (Chairman, Federal Reserve) We could very well be in a depression-like situation with much higher unemployment than today, very deep decline in output and no immediate prospects for a recovery, unlike the situation we have today where we do see the economy growing.
YDSTIE: The cost to the economy, to the taxpayer, to the average person would have been much greater, Bernanke said. And he said, it's been difficult to convince people that he did not participate in the rescue of big financial firms because he cares about Wall Street.
Mr. BERNANKE: I'm not a Wall Street person. I'm an academic. I come from a small town. I did it because I knew from my studies that the collapse of the financial system would have extraordinarily bad consequences for Main Street. And that is why we did what we did. And I firmly believe we did the right thing.
YDSTIE: While the passion of Bernanke's critics was attention-getting, most senators seemed more focused on the other business before the banking committee: the overhaul of the nation's financial regulatory structure. Committee Chairman Christopher Dodd, a Connecticut Democrat, has proposed stripping the Fed of its power to regulate banks and giving that responsibility to a new agency. Bernanke told Dodd he thinks that's a bad idea. He pointed to the experience in Britain during the financial crisis where the Bank of England lost its power to examine banks years ago.
Mr. BERNANKE: When the crisis hit and, for example, when Northern Rock Bank came under stress, the Bank of England was completely in the dark and it was unable to address effectively what turn into a very disruptive run and a problem for the British economy.
YDSTIE: Dodd countered that under his plan, the Fed would be able to accompany the new regulators when they examine banks. Dodd and the Obama administration also want to strip the Fed of its consumer protection functions. So, even if Bernanke is confirmed, as appears likely, he could preside over a Fed would reduced powers during his second four years as chairman.
John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
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