As the Wall Street Journal reported, Ben Bernanke was roughed up on Capitol Hill yesterday. From conservatives like Darrell Issa to leftwingers like Dennis Kucinich (who did a remarkably good job of grilling the witness) we saw broad-based criticism and outright hostility toward the Fed Chairman. They weren’t buying his story on the Fed’s role in the Bank of America/Merrill Lynch deal.
Setting aside the deferential tone usually reserved for Fed chairmen, members of the House Committee on Oversight and Government Reform repeatedly interrupted Mr. Bernanke at Thursday’s hearing to review the Fed’s role in engineering a government aid package for Bank of America Corp. The lawmakers pored over internal Fed emails subpoenaed by the committee and projected on a screen in the hearing room.
Much of the heat focused on the Fed’s part in pushing Bank of America to complete its acquisition of Merrill Lynch in January. House members on both sides grilled Mr. Bernanke on whether he threatened to force out Bank of America Chief Executive Kenneth Lewis. They accused him of inconsistencies in his statements and of keeping information from other agencies.
[. . .]
During the hearing, Mr. Bernanke at turns appeared defensive and unsure. He bristled at some questions, offering terse answers. Fed staffers accompanying him Thursday were visibly annoyed when the committee extended the hearing 10 minutes beyond the agreed time.
In particular, the Congressmen were openly skeptical of his lack of recollection on a key point:
Lawmakers pointed to a Dec. 20 email written by Richmond Fed President Jeffrey Lacker. One of a series unearthed by the panel, the email recounts a conversation between Messrs. Lacker and Bernanke in which the Fed chief planned to tell Bank of America that “management is gone,” if they quashed the deal and later needed more government aid, wrote Mr. Lacker.
Pressed on the issue, Mr. Bernanke said he didn’t make such a comment to Mr. Lewis and didn’t remember that part of the conversation with Mr. Lacker.
If the public were not so distracted by the three-ring circus of infidelities among prominent Republicans, the death of pop icons, and the throw-everything-up-against-the-wall legislative frenzy keeping Capitol Hill busy (not to mention the events in Iran), this story would be getting more attention, and deservedly so. It is quite unprecedented: a Fed chairman has been accused of threatening a private corporation, pressuring it not to reveal key information to shareholders, and now feigning a faulty memory.
At any other time that would trigger a Justice Department or special prosecutorial probe. In this case, New York state Attorney General Andrew Cuomo is on the case, but until yesterday there was little sign that anyone in Washington was all that concerned about the issue.
We will see where Cuomo’s investigation leads, but the reception that greeted Bernanke (and his frankly not compelling testimony) suggests he may not be confirmable, should Obama reappoint him early next year. Proposals to enlarge the power of the Fed and give it extraordinary regulatory powers won’t be helped by this issue. And perhaps that is a good thing. Maybe the Fed should go back to watching the money supply and leave the regulation and wheeling and dealing to others.
