BLOG VIEW: Ben Bernanke, Chapter Two

Written by Phil Hall
on August 31, 2009 No Comments
Categories : Blog View

Admittedly, it was no surprise that President Obama nominated Ben Bernanke for a second term as chairman of the Federal Reserve. However, I am somewhat bothered by remarks made by Sen. Richard Shelby, the top-ranking Republican on the Senate Banking Committee, who argues that there is the need to ‘carefully examine the impact of the Fed's failures as a bank regulator, how such failures contributed to the financial crisis and whether Chairman Bernanke's performance as the chief regulator merits his reconfirmation.’

My problem is actually twofold: the congressional business-as-usual modus operandi will make the confirmation an exercise in the inevitable, and the failure to get a secure game plan on the near-term future will leave the mortgage banking and housing industries in the dark.

First, let's look at the Shelby statement and give it a shrug. Really, who is kidding whom? The Bernanke confirmation can only be derailed if there is a surprise uprising among the Democratic majority on the Senate Banking Committee panel over how Bernanke handled his duties. Committee Chairman Sen. Chris Dodd, D-Conn., has already expressed his support for a second Bernanke term, despite what he claims to be his personal dissatisfaction with how the Fed handled the current crisis.

I suspect that the confirmation hearing will fall into a pattern of gentle praise and softball questions from the Democrats on the panel, and acerbic commentary and more direct questions from the Republicans about Bernanke's first-term performance. Of course, it was Obama's Republican predecessor who appointed Bernanke in the first place, and it would have been very easy for Obama to jettison him as a relic of the previous administration's disastrous domestic financial policy strategies.

The Democrats will not openly challenge the president on this matter. Unlike the so-called Blue Dog Democrats who are taking a constituency-fueled hard line on healthcare reform, there is no element within the party or the general population expressing a very loud lack of confidence with the White House decision-making on this issue.Â

My second concern is more disturbing: I strongly suspect that the confirmation hearing will not press Bernanke on what we can expect for the near future. There are too many unanswered questions on the table: the future of Fannie Mae and Freddie Mac, the possible chaos created by the proposed Consumer Financial Protection Agency (and what it will mean for the Fed's power), the warehouse lending crisis, the less-than-stellar track record of the Hope for Homeowners program, the damage that too-high unemployment rates are wreaking on the economy, and the possibility of a staggering new wave of foreclosures brought about by the mass resetting of non-modified adjustable-rate mortgages.

Will these issues be raised by the senators during the confirmation hearing? Probably not. And unless the industry decides to sit this one out, it is highly unlikely that anyone is going to press Bernanke for in-depth answers.

I have already stated that I was hopeful for new leadership at the Fed, so I won't hide my personal disappointment in the prospect of four more years with Bernanke. However, if we're going to be stuck with the guy, we should – at the very least – have a crystal clear understanding of where he is planning to take the Fed and what it will mean for the industry and the economy.
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What is your view? Feel free to e-mail me or leave your comments on this page – I am interested in hearing what the members of the industry think about this.

– Phil Hall, editor, [b][i]Secondary Marketing Executive[/i][/b].

[i] (Please address all comments regarding this opinion column to hallp@sme-online.com.)[/i]

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