Bernanke’s award as Time’s Man of the Year

Time Magazine honors Federal Reserve Chairman Ben Bernanke as their “Person of the Year.” Is the honor deserved? No, says the Washington Posts Binyam Applebaum and David Cho. Treasury official and current FDIC Chair Sheila Bair noticed serious problems as early as 2001 and tried to get subprime lenders to adopt a code of best practices, Freddie Mac stopped purchasing certain securities in 2002, the Greenlining Institute warned in 2004 that lenders were being unscrupulous and Federal Reserve Board Governor Edward Gramlich warned in 2005 that lending practices were unsatisfactory.

Did Bernanke do anything in response to these warnings? No. Bernanke sat around, twiddling his thumbs and complaining that people had been warning of disaster since 1979. Bernanke does not deserve a second term and should not be re-appointed to one.

Keep in mind that, because of Bernanke’s dereliction of duty in allowing the housing bubble to continue as long as it did, the US lost $6 trillion in housing wealth, which has cost the US $500 billion in annual income.

Bernanke failed to see the bubble in the first place. He felt that the Fed should not concern itself with asset bubbles, or call the attention of financial markets or the public to these bubbles by using its regulatory power to rein in lending, or explicitly using interest rates to target a bubble.

Also,

The Fed has directly lent more than $2 trillion to financial and non-financial institutions in the last two years. It has guaranteed trillions more.

The US needs to audit the Fed and to restrict it from its far-too-independent role.

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