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Nomination of Ben S. Bernanke S. HRG. 111–206 NOMINATION OF BEN S. BERNANKE HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED ELEVENTH CONGRESS FIRST SESSION ON THE NOMINATION OF BEN S. BERNANKE, OF NEW JERSEY, TO BE CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM DECEMBER 3, 2009 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html U.S. GOVERNMENT PRINTING OFFICE 54–239 PDF WASHINGTON : 2010 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS CHRISTOPHER J. DODD, Connecticut, Chairman TIM JOHNSON, South Dakota RICHARD C. SHELBY, Alabama JACK REED, Rhode Island ROBERT F. BENNETT, Utah CHARLES E. SCHUMER, New York JIM BUNNING, Kentucky EVAN BAYH, Indiana MIKE CRAPO, Idaho ROBERT MENENDEZ, New Jersey BOB CORKER, Tennessee DANIEL K. AKAKA, Hawaii JIM DEMINT, South Carolina SHERROD BROWN, Ohio DAVID VITTER, Louisiana JON TESTER, Montana MIKE JOHANNS, Nebraska HERB KOHL, Wisconsin KAY BAILEY HUTCHISON, Texas MARK R. WARNER, Virginia JUDD GREGG, New Hampshire JEFF MERKLEY, Oregon MICHAEL F. BENNET, Colorado EDWARD SILVERMAN, Staff Director WILLIAM D. DUHNKE, Republican Staff Director MARC JARSULIC, Chief Economist AMY FRIEND, Chief Counsel JULIE CHON, Senior Policy Adviser JOE HEPP, Professional Staff Member LISA FRUMIN, Legislative Assistant DEAN SHAHINIAN, Senior Counsel MARK F. OESTERLE, Republican Chief Counsel JEFF WRASE, Republican Chief Economist DAWN RATLIFF, Chief Clerk DEVIN HARTLEY, Hearing Clerk SHELVIN SIMMONS, IT Director JIM CROWELL, Editor (II) CONTENTS THURSDAY, DECEMBER 3, 2009 Page Opening statement of Chairman Dodd .................................................................. 1 Opening statements, comments, or prepared statements of: Senator Shelby .................................................................................................. 4 Senator Johnson Prepared statement ................................................................................... 76 NOMINEE Ben S. Bernanke, of New Jersey, to be Chairman of the Board of Governors of the Federal Reserve System ............................................................................ 6 Prepared statement .......................................................................................... 76 Biographical sketch of nominee ....................................................................... 79 Responses to written questions of: Senator Shelby ........................................................................................... 92 Senator Johnson ........................................................................................ 93 Senator Bayh ............................................................................................. 94 Senator Menendez ..................................................................................... 95 Senator Merkley ........................................................................................ 98 Senator Bunning ....................................................................................... 105 Senator Vitter ............................................................................................ 140 ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD Letter submitted by Senator Shelby ...................................................................... 157 (III) NOMINATION OF BEN S. BERNANKE, OF NEW JERSEY, TO BE CHAIRMAN OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM THURSDAY, DECEMBER 3, 2009 U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. The Committee met at 10:02 a.m., in room SD–106, Dirksen Sen- ate Office Building, Senator Christopher J. Dodd (Chairman of the Committee) presiding. OPENING STATEMENT OF CHAIRMAN CHRISTOPHER J. DODD Chairman DODD. The Committee will come to order. We are here this morning to consider the nomination of Ben Bernanke to be the Chairman of the Federal Reserve. Mr. Chairman, let me begin by welcoming you once again to the Senate Banking Committee. You have been before us on numerous occasions over the last couple of years, and we welcome your par- ticipation, and we want to thank you for joining us again here today. Today we are faced with, as I see it, two separate questions—and before I begin, let me just say, for the purposes of Members’ infor- mation, we are going to have a series of votes on the floor of the Senate. My intention would be to go until about 11:45, the next hour and 45 minutes, adjourning at 11:45, and then coming back at 1 p.m., because we will have these series of votes, Mr. Chair- man, and rather than having it sort of be disjointed going back and forth, we will have it in two parts. And we will get as much done as we can. When it comes time, I am going to have just opening statements by Senator Shelby and me, and then we will hear the statement by the Chairman, and then I am going to have 8 minutes to 10 minutes for questions. What I will do is put the yellow light on at 8, and, again, I have never been rigid about banging a gavel down, but I would ask Members to try and keep their questions in that timeframe so we can get to as many of our colleagues as possible and limit, to the extent possible, this afternoon. Obviously, if you want a second round, we will do that as well. I do not want to deprive any Members of the opportunity to be heard. But that is the way in which we will proceed. So, again, today we are faced, as I see it with this nomination, with actually two separate questions. First, should Ben Bernanke (1) 2 here, our nominee, stay on as the Chairman of the Federal Re- serve? And, second, as this Committee works to create a financial regulatory structure for the 21st century, what should be the role of the institution that our Chairman here, the nominee, would oversee? Does the existing structure of the Federal Reserve deserve to be maintained? Too often that question has been dominated by the personality of the Fed Chairman. But in my view, this is not about the nominee or the Chairman, nor is it about the Members of this Committee, including the Chairman of this Committee. This is about the institution that will be around long after the nominee or the Members of this Committee are gone. What makes the most sense for the success of this institution, the Federal Reserve? So first let me address the nomination for another term as Chair- man of the Federal Reserve. This is an incredibly important job during a crucial time in our Nation’s history, as we all know. Over the last year, our Nation has been rocked by a devastating eco- nomic crisis. This Committee has met dozens of times to talk about its impact on our constituents, the millions of Americans who have lost their jobs, families who have lost their homes, and those who have watched their wealth evaporate as home values dropped and investments were wiped out. Under your leadership, Mr. Chairman, the Federal Reserve has taken extraordinary actions to right the economy, providing liquid- ity to depositories, sustaining the commercial paper market, work- ing with the United States Treasury to restart the asset-backed se- curities market, and providing very critical support to the housing market. These efforts have played, in my view, a very significant role in arresting the financial crisis, and financial markets have begun to recover. For that, Mr. Chairman, you and the Federal Reserve deserve, in my view, praise for your acumen and gratitude for the role in preventing a far worse outcome than we might have otherwise seen. And I believe that you deserve another term as Chairman of the Federal Reserve, and I intend to vote for your nomination, both in this Committee and on the floor of the U.S. Senate, because I believe that you are the right leader for this moment in our Na- tion’s economic history, and I believe your reappointment sends the right signal to markets. And while I congratulate you for these efforts, I remain very con- cerned, as you know, about the weaknesses in the overall financial regulatory system that allowed the financial collapse to occur in the very first place, which brings me to the second question. Does the structure of the institution you will oversee deserve to be maintained as it presently is constituted? Today we have a regu- latory structure, as I see it, created by historic accidents as Gov- ernment reacted to problems with piecemeal solutions over nearly a century. You and I, I think, agree that the Federal Reserve should be strong and very, very independent—and I feel very strongly about that second word—and be able to perform its core functions: conducting monetary policy, supervising payment sys- tems, and acting as the lender of last resort. I worry that over the years loading up the Federal Reserve with too many piecemeal responsibilities has left important duties with- out proper attention and exposed the Fed to dangerous 3 politicization that threatens the very independence of this institu- tion. Congress gave the Federal Reserve the authority to protect con- sumers in mortgage markets in 1994. We have talked about this many, many times in this Committee. But for many years, many of us in the Senate were frustrated in our efforts to get the Fed to address predatory lending, and the Federal Reserve failed
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