Harassing Bernanke Not a Big Priority for Congress This Year
Apparently ripping Ben Bernanke a new one is not as cool as it used to be.
Lawmakers who will question Fed Chairman Ben S. Bernanke this week during his semiannual report on monetary policy say in interviews they recognize he has little left in his arsenal after reducing the federal funds rate on overnight loans among banks almost to zero and buying $1.7 trillion of securities to lower mortgage costs.
Instead, Democratic Senator Jack Reed says he wants Bernanke to use his “bully pulpit” to pressure Congress to make up for declines in spending by states and municipalities. Republican Senator Mike Johanns says Bernanke should urge President Barack Obama to “quit hammering businesses” with policies such as tighter financial regulations that may restrict employment. Politicians say they also want the Fed chairman to help reverse a drop in loans to small businesses, which account for more than half of U.S. job creation.
“There aren’t a lot of bullets left in that weapon” of monetary policy, said Johanns, 60, of Nebraska, who served as secretary of agriculture from 2005 to 2007. “I just don’t think there’s one or two things they could do and it would make it right,” said Rhode Island’s Reed, 60, the banking committee’s No. 3 Democrat behind Chairman Christopher Dodd of Connecticut and South Dakota’s Tim Johnson.
I'm wondering how many of these members of Congress actually understand that Bernanke's free money machine is not free at all. Of course I'm sure many of our esteemed Senators were either asleep in or completely avoided Econ 101 - had they been present and engaged, they would already know there is no such thing as a free lunch. Obviously since they are Senators, they have learned the opposite to be true because they usually get voted out by the time the bills come due for all their little pet projects. And so goes the government machine.
Bernanke can't force anyone to lend money and even if he could he'd probably have exhausted that option by now. So scratch that one, they're preaching to the choir.
Bernanke also can't force business to hire and again can't put a gun to banks' heads (if he takes a stand on cheap money he runs the risk of pissing off Treasury, who must be OK with banks stuffing all these cheap cash into T-bills) so it's sort of useless to spend time pleading with him to do so when he just can't.
Instead, a discourse on how Bernanke plans to back out of this mess would be appropriate but our dear Senators don't seem to be looking that far into the future and would rather know how Bernanke can point his free money hose in their districts' direction.