December 3rd, 2009, Fairfax, VA—Americans for Limited Government President Bill Wilson today urged members of the U.S. Senate Banking Committee to reject the re-nomination of Federal Reserve Chairman Ben Bernanke, saying “the Fed was responsible for financing the economic bubbles that, when they popped, wrecked the American economy, decimated retirement savings, and put millions of Americans out of work.”
“The dollar is sinking like the Titanic, gold is now over $1,200 an ounce, and foreign creditors are increasingly wary of buying U.S. treasuries,” Wilson said, “the principal cause of which has been the loose monetary policy of the Federal Reserve.”
“The monetary base has more than doubled since the financial crisis began in 2007,” Wilson explained, “and the predictable inflation is already taking root, as the nominal value of gold warns us.”
Today at 10AM, the Senate Banking Committee began confirmation hearings on Bernanke who Barack Obama has nominated for a second term as Fed Chair. Yesterday, Senator Bernie Sanders announced that he had placed a legislative hold on the nomination, meaning it will take 60 votes to bring the nomination to the floor if it comes out of committee.
The hearing came as new questions are emerging over the Term Asset-Backed Securities Loan Facility (TALF) by Senators David Vitter and Jim Bunning. They are asking New Fed Chair Dennis Hughes to explain in further detail how the program works.
According to an Americans for Limited Government analysis of the TALF program that was authorized by the Federal Reserve Board of Governors, “The program applies to credit card debt, student loans, Small Business Administration loans, car loans, commercial real estate mortgage-backed securities, and more.”
“Under TALF, investors put up a small fraction (5%-16%) of the value of a loan portfolio that they wish to purchase; the rest is borrowed from the Federal Reserve Bank of New York. Yields on these portfolios are expected to be around 11% to 15%,” states the backgrounder.
As a result, the analysis states the Fed will have trouble “reducing the money supply when inflation increases because of the Fed’s commitments under the TALF program.”
Wilson said that the Fed will unable to stop another bubble from forming. “Every vote to put Ben Bernanke back in charge of the Fed will rightly be viewed as a vote in favor of the outright devaluation of the dollar,” Wilson added, “for which the American people will rightly hold their Senators accountable. You don’t give a vote of confidence in the economy by rehiring one of the principal architects of our misery.”
According to Rasmussen Reports, only 21 percent of voters support a second term for the Fed Chair.
Wilson laid responsibility for the financial crisis at the feet of the Federal Reserve, saying that loose lending and artificially low interest rates beginning in the 1990’s, and exploding in the 2000’s, fueled the housing bubble. “This terrible policy began under former Fed Chair Alan Greenspan, and has continued under Bernanke’s watch.
Outstanding mortgage debt rose from $3.805 trillion in 1990 to $14.568 trillion in 2007—a 383 percent increase. The national debt itself rose from $3.23 trillion to $9 trillion, a 278 percent jump.
Wilson said the money supply behaved predictably as a result, rising from $1.787 trillion to $5.268 trillion over the same period, according to the Ludwig Von Mises Institute. And prices followed: gold rose from $386.20 an ounce to $695.39, a 180 percent increase, and oil rose from $23.19 a barrel to $64.20, a 277 percent increase.
“This unsustainable debt binge flooded world markets with liquidity, resulting in bubble after bubble: tech, housing, oil and commodities, and then treasuries,” Wilson said, “and it would have been impossible without the Fed’s easy money policies. We cannot print our way to prosperity.”
“Under those circumstances, the Senate must not re-confirm Ben Bernanke to another term of Fed Chair. America needs a new monetary policy, not more dollar devaluation,” Wilson concluded.