Last year, the American people overwhelmingly voted for a change in our national priorities and for a new direction on the economy. After eight long years of trickle-down economics that benefitted millionaires and billionaires while leaving the middle class behind, Americans demanded a change that would put the interests of ordinary people ahead of the greed of Wall Street and the wealthy few.
What the American people did not bargain for was another four years for one of the key architects of the Bush economy.
Before Ben Bernanke became the Fed chairman in 2006, he headed the council of economic advisers for President Bush – one of the most right-wing presidents in American history. He also sat on the Fed board of governors from 2002 to 2005. Perhaps more than anyone else, Bernanke was in a position to diagnose the impending economic disaster and take steps to stop it. Tragically, not only did he fail to prevent the economic collapse that we have experienced, he did not even warn the American people that it was coming until it was too late. Equally distressing, his actions since the crisis began may leave taxpayers holding the bag for an even bigger bailout in the future.
As chairman of the Federal Reserve, Bernanke has four main responsibilities: (1) to conduct monetary policy in a way that leads to maximum employment and stable prices; (2) to maintain the safety and soundness of financial institutions; (3) to contain systemic risk in financial markets; and (4) to protect consumers against deceptive and unfair financial products.
By any sober assessment of the facts, Bernanke has been an abysmal failure in all four of these areas.
Since Bernanke took over as Fed chairman, the unemployment rate has more than doubled and, today, an incredible 17% of the American workforce is either unemployed or underemployed.
Not since the Great Depression has the financial system been as unsafe, unsound, and unstable as it has been during Bernanke's tenure. More than 120 banks have failed since he became chairman, despite the Fed's army of nearly 3,000 bank supervisors with broad powers to maintain the safety and soundness of financial institutions.
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Under Bernanke's watch, the value of risky derivatives held at our nation's top commercial banks grew from $110tn to more than $290tn, 95 per cent of which are concentrated in just five financial institutions. While Bernanke was asleep at the wheel, Warren Buffett, as early as 2003, called derivatives "financial weapons of mass destruction" and warned that they posed a "mega-catastrophic risk" to the economy.
Bernanke failed to prevent banks from issuing deceptive and unfair financial products to consumers. Under his leadership, mortgage lenders were allowed to issue predatory loans they knew consumers could not afford to repay. This risky practice was allowed to continue even though the FBI warned in 2004 of an "epidemic" in mortgage fraud that had the potential to become "the next S&L crisis".
After the financial crisis hit, Bernanke's response was to provide trillions of dollars in virtually zero-interest loans and other taxpayer assistance to some of the largest financial institutions in the world. Adding insult to injury, Bernanke has refused to tell the American people the names of the institutions that received this handout or the terms involved. Trillions of taxpayer dollars are at risk and Mr Bernanke continues to hide the names!
Further, despite the American people spending $700bn bailing out huge financial institutions because they were "too-big-to-fail," Bernanke has allowed three of the four largest financial institutions in the country to become even larger than they were before the financial collapse.
In the midst of a horrendous economic crisis that has caused massive suffering in this country Bernanke had the opportunity to force irresponsible and corrupt Wall Street firms to change their ways. The chairman could have demanded that Wall Street provide adequate credit to small businesses to create decent-paying jobs. He could have insisted that bailed-out banks end the usurious practice of charging interest rates of 30% or higher on credit cards. He could have required bailed out banks to stop making risky bets in derivatives. He could have required bailed-out-banks to modify mortgages so that homeowners could afford to stay in their homes. He could have required too-big-to-fail banks become smaller. He could have instituted a major investigation of how the financial collapse occurred in the first place, and held chief executives at those banks accountable.
Instead, Wall Street, with Bernanke's help, has instituted a system of "heads they win, tails taxpayers lose". If Wall Street wins, their executives receive millions in bonuses and they keep all of their profits. If Wall Street loses, taxpayers bail them out, and their executives still keep their bonuses.
As the middle class of this country continues to suffer, we need a chairman of the Fed who is more concerned about expanding the productive economy – increasing decent-paying jobs for all Americans – than continuing to fan the flames of Wall Street greed that precipitated this crisis.