Scott Spiegel

Critics of Federal Reserve Chairman Ben Bernanke’s performance in his first term blame him for failing to recognize the threat of the looming subprime lending crisis; his supporters laud the aggressive policies he enacted in response to the crisis.

I fault him for both.

Before the crisis, Bernanke helped Fannie Mae and Freddie Mac executives cover up their scheme to hide trillions of dollars in junk mortgages and give themselves enormous bonuses.  In the process, he failed to address the growing housing bubble that precipitated the financial crisis.

His solution was worse.  Having learned the wrong lesson from the Great Depression—that the government prolonged it by not intervening more, rather than intervening too much—Bernanke radically expanded government’s power and “reinvented the Fed,” as Time magazine put it mildly in their recent cover story on Bernanke.

Time glowingly continued: “[H]e conjured up trillions of new dollars and blasted them into the economy; engineered massive public rescues of failing private companies… lent to mutual funds, hedge funds, foreign banks, investment banks, manufacturers, insurers and other borrowers who had never dreamed of receiving Fed cash… revolutionized housing finance with a breathtaking shopping spree for mortgage bonds; blew up the Fed’s balance sheet to three times its previous size; and generally transformed the staid arena of central banking into a stage for desperate improvisation.”

“Conjured up,” “blasted,” “engineered,” “revolutionized,” “breathtaking,” “shopping spree,” “blew up,” “desperate improvisation”—somehow these don’t sound like particularly reassuring terms for investors in the world’s largest financial system.

Bernanke isn’t finished.  The Federal Reserve has been buying up Fannie and Freddie securities to try to keep mortgage rates artificially low and stimulate the housing market.  The program is set to end in March, but Bernanke is toying with the idea of propping up the housing industry indefinitely.  Sound familiar?

The question is whether the Senate will reconfirm Bernanke for another four-year term before his first term expires on January 31.

Dumb arguments for keeping Bernanke abound:

•    The Financial Times of London reports, “Economists warned that a rejection of Mr Bernanke could be seen as a threat to the central bank’s independence.  US Treasury yields were little changed but stocks fell more than 2 per cent” due to uncertainty regarding reconfirmation.

Come on—it’s at least as plausible that stocks plummeted last week because of Obama’s announcement that he was going to impose a new tax on banks to subsidize the Troubled Assets Relief Program (TARP).  (Especially given that the Dow Jones Industrial Average slipped 219 points while Obama was still giving his speech.)

After Bernanke’s prospects improved over the weekend, Obama’s boosters at the Associated Press helpfully divined the trend in the stock market for us: “Amid the news, the Dow Jones industrial average rose 24 points.”  Well, the Dow was down 3 points on Tuesday—I think this means Bernanke’s chances are dimming.  What say ye, Associated Oracle?

•    Mohamed El-Erian, CEO of bond investor Pimco, declared, “A No vote on Bernanke would be viewed by markets as adding yet another uncertainty in an already fluid economic and policy environment.”

Give me a break: Ben Bernanke-Tim Geithner-Larry Summers form the very Axis of Uncertainty.  The Obama administration has demonstrated that it is capable of deciding, in any given week and depending on its poll numbers, to announce any manner of blanket economic policy to try to shore up its popularity.  This is exactly what causes uncertainty in the market: whimsical manipulations from disconnected puppet-masters on high.  Sowing a little uncertainty about whether King Caprice’s minions will remain in office is the surest prescription I know of for assuaging the market.

•    Obama’s team “saved” the economy, so it’s best to keep the same leadership in place.

Obama’s team didn’t save anything—it wasted a trillion dollars and slowed down the real recovery.  Obama claimed that unemployment would reach 8.0% if we didn’t pass his stimulus bill last spring.  We did, and unemployment is at 10.0% and projected to increase.  The last people who should still be in charge of our monetary policy are the people who helped Obama implement his disastrous recovery strategy.

•    Chris Dodd, the Senate banking committee’s chairman, announced that booting Bernanke would hurl our financial system into a “tailspin.”

Chris Dodd certainly knows something about sending the economy into a tailspin.  Given his role in the subprime lending crisis, I say his vote on any financial matter from now until his retirement next January ought to automatically count as a vote for the opposite of whatever side he’s on.

•    Dick Durbin, Senate Majority Whip, pointed out that conditions that led to the financial crisis were in place before Bernanke took office.

Yes, and if Noah had deliberately drilled a hole in the bottom of his ark, I think he could credibly claim that conditions that led to the Great Flood were in place before his time at sea.  But that doesn’t mean he would bear no responsibility for having made things worse.

Paul Krugman, whom I never thought I’d quote (except mockingly), recently wrote, “Before the crisis struck, Mr. Bernanke was very much a conventional, mainstream Fed official, sharing fully in the institution’s complacency.  Worse, after the acute phase of the crisis ended he slipped right back into that mainstream.”  Granted, Krugman is only partly talking about Bernanke’s failure to head off the imminent lending crisis.  He’s also talking about Bernanke’s failure to push for cumbersome bank regulations and inflate the currency, goals Krugman seems to think worthwhile (we are talking about a New York Times columnist, here); but the general characterization still applies.

Krugman continues, “During the run-up to the crisis, as financial abuses proliferated, the Fed did nothing.  In particular, it ignored warnings about subprime lending…  Mr. Bernanke didn’t acknowledge that failure, didn’t explain why it happened, and gave no reason to believe that the Fed would behave differently in the future.”

I’m mystified as to why so many in Congress are reluctant to sack Bernanke for poor performance.  Perhaps it’s because they fear it will remind their constituents that they may apply the same standard to their elected officials.

Warning: Tiger Woods, Michael Jackson, and Balloon Boy are nowhere to be found in this list!

1. Iran Election Upheaval – Brave protestors took to the streets of Tehran and Twittered to the world shocking pictures and videos of civilian beatings and shootings by the Iranian Revolutionary Guard, despite the inability of our Commander-in-Chief to raise an eyebrow over the carnage for a week.  As “President” Ahmadinejad continues to mock the West’s demands that Iran halt its uranium enrichment, the outrage of the emboldened and mobilized protest movement has the potentially farthest-reaching consequences of any event in 2009.

2. Health Care Reform Debate – Simultaneously the most outrageous and boring story of 2009.  On the one hand, we listened all year in disbelief as conservative think tanks unearthed fresh horrors in evolving versions of the bill; on the other hand, we listened to Democrats recite tired lies about “45 million uninsured” and “bending the cost curve” and “Nancy Pelosi approving a surtax on Botox.”  As Obama supporter Camille Paglia admitted, “By a proportion of something like 10-to-1, negative articles by conservatives were vastly more detailed, specific and practical about the proposals than were supportive articles by Democrats, which often made gestures rather than arguments and brimmed with emotion and sneers.”

3. Climategate – In which more pages of e-mails and computer code than in all the healthcare reform bills combined were leaked to the press, revealing climate “scientists” fudging data, threatening to delete data, and doing everything but counting pregnant chads to make the results come out the way they wanted.  Here’s a deal for Michael Mann, author of the discredited “hockey stick” graph of global temperature over the past few millennia: if “trick,” “hide,” and “decline” no longer mean what they once did, then neither do “dire,” “peer-reviewed,” or “consensus.”

4. Afghanistan Surge – General McChrystal begged President Obama in private and in public to give him the troops he needed to implement the counterinsurgency strategy Obama had hired him to carry out back in March.  After four months of dawdling, Obama gave McChrystal 75% of his revised request—which was 50% of his initial request—with no rationale provided for his bargain basement offer.  If this is how Obama treats the “good war,” I’d hate to see what he does to the bad one.

5. Tea Party Movement – Rasmussen released a poll in December showing that in a three-way generic race among Democratic, Republican, and Tea Party candidates, the Tea Party contender would beat the Republican by 5 points.  Despite the left’s ludicrous charges of racism and desperate use of lewd sexual terms never adopted by any Tea Party patriot, the biggest mass uprising against government spending and abuse of power since 1773 grew angrier and more forceful as the year went on, and will only be further inflamed by the Senate’s Christmas Eve passage of the health care spending act.

6. Stimulus Bill Passage – It would give you a concussion if it fell on you, even if dropped by Obama at the nadir of his bow to the King of Saudi Arabia or the Emperor of Japan.  Four months after its urgently required, life-or-death passage, only 5% of stimulus funds had been spent, a detail the administration papered over by simply lying about funded projects.  Naturally, this summer Democrats began clamoring for another stimulus package.

7. Sonia Sotomayor Confirmation – Proof that Democrats were never the party against racism—they were once the party that supported racism, and now they’re the party that supports reverse racism.  If Our Wise Latina’s speeches on biological differences between the races had been half as incendiary, the media would be consoling us that she might have been rejected for the Supreme Court if what she had said had been any worse; yet the fact is, if her words had been twice as offensive, wimpy Republicans in Congress would probably still have voted to confirm her.

8. Ft. Hood Shootings – The first terrorist attack on U.S. soil since 9/11, which was allowed to happen for the same reason as 9/11—the politically correct refusal to identify the danger of Islamism and its adherents’ wish to obliterate us and our allies for promoting freedom.  The most damning detail was Major Nidal Hasan’s PowerPoint presentation to a group of army scientists on the Koran’s injunction to decapitate infidels—to which the army responded by giving Hasan a promotion in Texas to get him out of their hair.

9. Pakistan Helps the U.S. Fight the Taliban – The Pakistan Army finally stepped up to the plate, no thanks to Obama’s dithering over the U.S.’s own commitment in the region.  Pakistan began Operation Path to Deliverance, in which they managed to send the same number of troops Obama finally agreed to as part of General McChrystal’s surge (30,000) to South Waziristan to beat back insurgents.

10. New Jersey/Virginia Gubernatorial Elections – Last year, liberals hooted that Republican primary candidates were avoiding George W. Bush like the plague, but the joke’s on them—their messiah is turning into the kiss of death in just his first year of office.  Obama’s multiple campaign stops for would-be governors Corzine and Deeds did nothing to assist them, and possibly even hindered their candidacies.

Five months after the stimulus bill was passed, we can now say that we’ve witnessed the following under-stimulating results.

Payrolls are falling more than forecast, with employers having cut 467,000 jobs in June, following a 322,000-job decline in May.  Factory jobs fell by 136,000 after dropping 156,000 in May.

Unemployment is at 9.5%, the highest level in 15 years, and is projected to exceed 10% by the end of 2009.  Some economists expect it to remain at historically high levels for years.

The average workweek is at 33 hours, the lowest in 45 years.

Average weekly earnings are down to $611.

The national debt is $11.5 trillion.  The Congressional Budget Office projects the deficit for 2009 to be almost $2 trillion and for 2010 to be more than $1.4 trillion.

The Treasury is increasing its sale of debt to pay for spending.  Treasury offered $1 trillion in notes and bonds in the first half of 2009 and plans to offer another $1 trillion by the end of 2009.

Colin Powell, of all people, is alarmed that Obama’s spending orgy may be swelling government and the national debt: “I’m concerned at the number of programs that are being presented, the bills associated with these programs and the additional government that will be needed to execute them…  [We have] a huge, huge national debt that, if we don’t pay for [it] in our lifetime, our kids and grandkids and great-grandchildren will have to pay for…”  Now he tells us!

Jared Bernstein, chief economic advisor to Joe Biden, whose office is managing the stimulus, says, “It’s working, it’s demonstrably working.”  According to Bernstein, $200 billion in stimulus money has already been obligated or spent.  Case closed!

Note to Bernstein: In order to demonstrate causality, you have to show that: (1) there was a cause, (2) there was an effect, and (3) the cause influenced the effect.  Defenders of the stimulus bill are still stuck on #1: as of June, only 10% of all stimulus funds had been distributed.  Bernstein’s $200 billion “obligated or spent” figure—eerily reminiscent of the administration’s “jobs saved or created” trope—is untrustworthy, because the administration has already been caught lying about money committed to spending projects.

Given the miserable failure of the stimulus bill, naturally Congressional Democrats want… another stimulus bill!  According to House Majority Leader Steny Hoyer, “We need to be open to… further action.”  Democratic Senator Sheldon Whitehouse said that another stimulus would “probably take place towards the end of the year.”  Second-ranking Senate Democrat Dick Durbin said he would leave any decisions on passing another stimulus bill to “the president’s evaluation”—and we all know how cautious Barack “Fiscal Restraint” Obama will be.  Stan Collender, former Congressional budget analyst, said that another stimulus bill may be possible if the economy gets worse: “Right now it doesn’t seem to be justified…  Come September, it might be.”

The first stimulus package was “a bit too small,” according to Laura Tyson, member of Obama’s Economic Recovery Advisory Board.  Paul Krugman writes in the New York Times, “O.K., Thursday’s jobs report settles it.  We’re going to need a bigger stimulus.”  Biden advisor Bernstein says, “There is no conceivable stimulus package on the face of this earth that would fully offset the deepest recession since the Great Depression.”

Let’s see: the stimulus bill committed a record $787 billion in spending.  Tyson says it should have been “a bit” bigger.  Congressional Democrats and Krugman wanted it much bigger.  Bernstein admits it would have to be infinitely big to work.  Can we give Bernstein the award for inadvertent honesty on this one?

The clincher that the stimulus bill was an abject failure—and that another stimulus bill would be a repeat failure—is the fact that Wall Street has just hit a 10-week low after talk of a second stimulus package recently began.  Amateur analysts suggest that chatter about another stimulus bill is making investors nervous, because—get this—it shows that the economy might not be recovering.  According to Hugh Johnson of Johnson Illington Advisors, “When there’s talk about another stimulus plan, that adds fuel to that fire, it intensifies the concerns about the timing and strength of the recovery.”

Is it possible, just possible, that investors are nervous, not because Congress’ hinting at a second stimulus package implies the economy is not recovering—which I think they can figure out on their own—but because Congress is hinting at a second stimulus package?

If Democrats aren’t persuaded by Republicans’ argument, backed up by ample historical data, that spending vast quantities of wealth not yet created does not stimulate the economy in the long term, could they at least admit their little experiment failed and try the Republican option for a change?

In a survey conducted in early June, Rasmussen found that Americans trust Republicans more than Democrats on six out of eleven top issues.

It’s no surprise that Republicans lead on national security: after 9/11, when Bush implemented policies to fight terrorism, Republicans’ trust ratings skyrocketed, because Americans saw the problem at hand and liked the way Republicans were dealing with it.  Years later, Obama and other Democratic presidential candidates boasted how much more effective they would be on national security—a fraud they were able to perpetrate because Bush had kept us safe since 9/11 and the threat of attack seemed remote.  Even if Americans actually came to believe that the way to defeat terrorists is to love them, Obama soon co-opted Bush’s entire war policy, thus validating Republicans’ arguments for the past eight years.

So we know national security isn’t Democrats’ strong suit.  Perhaps to distract from their unpopular war agenda, Obama and the newly engorged Democratic Congressional majorities started talking about “a new era of transparency.”  After 384 Obama appointees turned out to be tax cheats, liars, campaign underwriters, and lobbyists, Republicans now lead on government ethics, the second-most important issue to voters.

When ethics didn’t prove to be Democrats’ trump card, Obama started traveling around the country handing out stimulus goodies and talking about projects and jobs funded by the Recovery Act.  Then ABC’s Jake Tapper started uncovering all of Obama’s lies about the nonexistent effects of stimulus spending, and economists deconstructed the lunacy of his “saved or created” jobs argument.  Now a plurality of Americans wants the unspent portion of the stimulus recalled.

In a desperate gambit, Obama took over GM and strong-armed Chrysler’s secured creditors into lousy bankruptcy terms.  The Fed spent $1.2 trillion to lower mortgage rates, which increased, and pledged so much spending that long-term interest rates are spiking.

So now—surprise!—the public trusts Republicans more on the economy, the top-rated issue.  As Rasmussen reports, “Voters not affiliated with either party now trust the GOP more to handle economic issues by a two-to-one margin.”  So the economy doesn’t seem to be Democrats’ ace in the hole, either.

In a sleight of hand, Obama then renewed his push for climate change legislation and health care reform—gargantuan spending boondoggles that would somehow miraculously save our economy, too!  Then Democrats rolled out their plans, and businesses that would actually be affected by the legislation ran screaming.

In Rasmussen’s report, Democrats get their “highest” rating for health care (47%)—but this was measured before we heard actual health care proposals from Democrats, before the AMA and the Chamber of Commerce condemned Democrats’ government-sponsored plan.  Democrats’ lead on the issue has shrunk 8 points just since last month.

The other issues where Democrats do “well” are Social Security (43%), education (44%), and abortion (41%)—all issues no one is making major legislative proposals about right now.

Democrats’ confidence ratings are like a shell game: whichever issues the nation is dealing with are correctly seen by Americans as more capably handled by Republicans, but Democrats are assumed to be wonderful—just wonderful!—on all the other concerns we don’t happen to be tackling at the moment.  As soon as Democrats get their hands on something and we see what they actually want to do to us, trust in their ability plummets, and they move on to another, more pressing priority.

The further the nation is from the reality of an issue, the more likely Democrats are to be trusted; the closer it gets to that reality, the more likely Republicans are to be trusted.

“Ending the war in Iraq” sounds reasonable—until you read the fine print and realize Democrats don’t care whether we win first.  “Renewing relations with the Muslim world” sounds kindhearted—until the president makes nominal demands to Muslim leaders and they start blowing things up again.

“Introducing ethical standards” sounds noble—until Obama nominates actual human beings to fill posts and we get a whiff of their backgrounds.  “Being the first post-racial president” sounds refreshing—until Obama nominates for the Supreme Court a former Puerto Rican separatist who thinks “inherent physiological differences” force judges to decide the way they do.

“Stimulating the economy” sounds invigorating—until it is translated into a 1,588-page doorstop that no one has time to read.  “Moving quickly to prevent an economic crisis” sounds prescient—until you find out that four months later only 5% of stimulus money has been spent and the administration is lying about funded projects.

“Cutting taxes on 95% of Americans” sounds generous—until you realize the things Obama wants can’t be paid for without raising taxes on current or future generations.  “Saved or created 150,000 jobs” sounds impressive—until the administration admits this figure is based on theory and not facts.

“Saving the planet” sounds conscientious—until you find out that it involves so many devious machinations and new ways to burden Americans that the Senate had to hire a speed-reader to recite the bill.  “Health care reform” sounds bighearted—until you hear that it will cost $1 trillion and that Democrats want a 25% national sales tax to pay for it.

You can usually tell when public figures accused of crimes are guilty—their supporters invariably take several steps back and make broad, abstract statements: “She’s an excellent teacher whom no one has ever spoken ill of!”  (But did she commit statutory rape with a student or not?)  “He has always worked to promote racial justice in his borough!”  (But did he accept kickbacks for minority contracts or not?)  “He has a lovely wife starring in ‘I’m A Celebrity… Get Me Out Of Here!’”  (But—oh, never mind.)

Similarly, for strategic reasons Democrats like to keep things intangible, “big-picture,” “forward-looking,” “high-minded”—not concrete, detailed, present-looking, practical.

Every time one of their shells is revealed to contain nothing underneath, Democrats lose the public’s trust on that issue, but the trust always seems to pop up again elsewhere.  Instead of playing Whac-a-Mole with Democrats’ confidence ratings, Republicans should reveal their entire game as the swindle it is.

In an unintentionally comic piece, Stanley Crouch claims, “On President Obama’s watch, patience is the ultimate virtue.”

Is he kidding?  To rephrase the expression, Barack Obama never waited a day in his administration.  (Up until the presidential campaign, “worked an honest day in his life” covers him pretty well, too.)

Obama would have nationalized healthcare, banned carbon dioxide, withdrawn from Iraq, and started a second New Deal while still in the “Office of the President-Elect” if he could have gotten away with it.

President “I want a stimulus package on my desk by January 20” Obama couldn’t be bothered with niceties like posting the bill online for 48 hours for voters to read, even though he waited four days after it passed to sign it.  In his quote from the week before the $800 billion boondoggle was brought to a vote—“We can’t afford to make perfect the enemy of the absolutely necessary”—by “perfect” he evidently meant “a bill with completed wording.”

Obama is just fine with Nancy Pelosi ramming “healthcare reform” through Congress with a simple majority by inappropriately using budget reconciliation to write it into law after the budget is approved.

President “Delay is no longer an option” is content to let the Environmental Protection Agency enact cap-and-trade regulations if Congress doesn’t pass them soon enough for his liking.

Our Hastener in Chief is willing to lose the war in Iraq so he can make sure combat troops are home in time for the midterm elections.

And President “Bow at the Waist” Obama just can’t wait until he and Fidel Castro, Kim Jong Il, and Mahmoud Ahmadinejad are on good enough terms that he can add them as Facebook friends, even though Castro hasn’t promised to confirm his request.

Crouch explains Obama’s leadership style thus: “He clearly understands that a democracy with many, many circles of power is prone to a slow velocity of policy achievements.”  Apparently Obama understands it well enough to cut Republicans out of committee meetings on the stimulus package, cut the American people out of a chance to look at and comment on the bill, cut shareholders out of hiring and firing decisions at automobile manufacturers and banks, and cut Congress out of passing environmental regulations.  That’s one way to deal with “many, many circles of power,” otherwise known by our Founding Fathers as “checks and balances” and “limits on rule.”

Crouch contrasts Obama’s administration with a dictatorial or totalitarian regime by explaining that in the latter, “Orders are given to go with a theory…  Physical threats can almost always guarantee compliance and the speed once called ‘greased lightning.’”

Let’s recount what orders Obama has served up so far to go with his “theories.”  There are the massive stimulus package and budget to go with the discredited theory of Keynesian economics.  There are the wasteful bailouts to go with the meritless theory that some companies are “too big to fail.”  There are the suicidal environmental regulations to go with the delusional theory of man-made global warming.

As for threatening those who do not follow orders, Obama has already set his staff on private citizens who might impede his progress (Rush Limbaugh, Jim Cramer), fired or intimidated CEOs who interfered with his plans (Rick Wagoner, Vikram Pandit), ordered creditors to accept lousy bankruptcy terms and warned that he would ruin their reputations if they didn’t comply, and issued a veiled threat against dissenters by implying that he might unleash the Department of Homeland Security as a bulwark against their dangerous right-wing tendencies.

Crouch sagely counsels, “It is always good for our nation to sit back, be patient, be determined, be disciplined and listen carefully to everything that is said.”  Sorry—who was it who didn’t have time to post the stimulus bill online for Americans to read so they could “listen carefully to everything that is said”?  Who is too busy to provide promised details on how the stimulus money is being spent so we can be “disciplined” and spend it wisely?  Who isn’t “patient” enough to let U.S. soldiers in Iraq finish their job and let Congress and the American people have a chance to debate nation-altering healthcare and environmental legislation?

Perhaps what Crouch really meant is that Obama’s “patience” is demonstrated by his willingness to wait a long time for our problems to be solved.  Maybe Obama believes that precipitous action is needed now, and then we can relax and engage in luxuries like “debate.”  But if these issues have allegedly gone unaddressed for so long and will take years or decades to resolve, then we can certainly afford to spend a mere few months discussing them.

Even Stalin probably didn’t institute one of his Five-Year Plans without sleeping on it.