Movement To Block Bernanke Gathers Steam

The renomination of Ben Bernanke as chairman of the Federal Reserve should not be rubber-stamped by the Senate until Bernanke and the Fed are more transparent and accountable to the public, says a growing coalition of activists roused by Reps. Alan Grayson and Ron Paul, who have asked the Senate to put a hold on Bernanke's nomination.

Grayson, a Florida Democrat, and Paul, the libertarian Texas Republican, have together launched a petition drive on the website UnmaskTheFed.com [1] that calls on the Senate to "vote no on Ben Bernanke's confirmation until the Federal Reserve comes clean on what it has done with OUR money."

The two members of Congress sent a letter to Senate Banking Committee Chairman Christopher Dodd, D-Conn., asking that hearings on Bernanke's confirmation be postponed until Bernanke discloses some basic information about the taxpayer dollars used to bail out Wall Street financial institutions.

At the top of the list is a demand that the Fed supply information sought by the Bloomberg financial news service [2] through a Freedom of Information Act request. That request was filed last year at the height of the Fed's bailout activity and requested details on the collateral arrangements under which the Fed issued $1.5 trillion in loans to some of the nation's largest financial institutions. In August, a U.S. District Court judge ordered the Fed to grant Bloomberg's information request [3]. The members specifically want disclosure of tax dollars used to rescue the Bear Stearns brokerage from collapse and merge it with JPMorgan Chase.

The letter also asked for all Federal Reserve documents that went to New York Attorney General Andrew Cuomo’s office relating to the Bank of America/Merrill Lynch merger, which has been overshadowed by charges of deception and fraud by executives on both sides of the merger. Finally, the members want full disclosure of so-called "off-balance-sheet" Fed transactions, many of which were used to prop up specific institutions and for which taxpayers are ultimately liable, and the release of the minutes of Federal Open Market Committee meetings, during which these transactions would likely have been discussed.

In an article posted today [4] on The Huffington Post, Grayson writes:

It would simply be unreasonable for the Committee to confirm Bernanke to another term given how little is known about what he has actually done. Remember, Ben Bernanke didn't see the crisis coming and has added $1.2 trillion to the Fed's balance sheet through covert bailouts.

The Senate cannot hope to have a full debate over his record if nothing is public.

[In a conference call with bloggers, I asked Elizabeth Warren, the chair of the Financial Oversight Board, her reaction to the movement to put a hold on the Bernanke renomination. While she did not explicitly embrace the idea, she said, "Any examination of the activities of the Fed, and particularly the data that the Fed has about the economic crisis, is fair game. ... I just regard that as part of due diligence."]

So far, Bernanke has sought to put a friendly face on what has otherwise been a business-as-usual posture of the Fed when it comes to public disclosure of key decisions that have put tax dollars and the Main Street economy on the line. The Obama administration, by supporting Bernanke's renomination, has given this behavior political cover.

But if Bernanke chooses to stonewall on these critical questions when his confirmation hearings get underway later this month, all it takes is for one member of the Senate to object to moving Bernanke's nomination to the floor of the Senate. The tactic of placing a hold on a Senate nomination has been frequently used by Republicans against Obama administration appointees for for less consequential reasons than what is happening with trillions of taxpayer dollars in the name of staving off the next Great Depression. What's unclear is whether a member of Congress will be bold enough to stand up to Wall Street and to what William Greider calls "the temple."

Until the answer to that question becomes clear, the public has at least one good avenue to channel its outrage over how the Fed has operated in the shadows to cover Wall Street's bad bets at our expense.