Kyl Statement on Ben Bernanke

Statement

Kyl Statement on Ben Bernanke

U.S. Senate Republican Whip Jon Kyl today made the following statement today regarding the confirmation of Ben Bernanke to be chairman of the Federal Reserve:

"When I think of what a Federal Reserve chairman is supposed to do, I think of two key responsibilities: maintaining stable prices and keeping our dollar strong. Unfortunately, Chairman Bernanke's Federal Reserve has not performed well on either count.

"Consumer inflation, as measured by the Bureau of Labor Statistics, increased 2.9 percent from June to December 2009.

"Manufacturers' cost of production is up 4.4 percent versus last year; up 5 percent in the past six months; and up 9.5 percent in the past three months.

"Other measures of inflation, such as the 5-year, 5-year forward, clearly show an accelerating trend. Inflation is the last thing our economy needs right now.

"As for the dollar: During the last year, its value dropped more than 10 percent. Much of this weakness is attributable to the Federal Reserve setting short-term interest rates at virtually zero.

"As such, gold prices have surged, as investors worry that the dollar is no longer a reliable store of value.

"OPEC has contemplated designating oil in a currency other than the dollar, and foreign economists have suggested that we issue our own government debt in yen, euros, or yuan, rather than dollars.

"While neither of these actions is likely, it is clear that the Federal Reserve needs to pay greater attention to the dollar's value when making monetary-policy decisions. The preeminence of the dollar is synonymous with American prestige abroad. Nothing represents our nation's soft power more than its strength.

"Another chief concern of mine is that, during Chairman Bernanke's tenure, the Federal Reserve and other banking regulators showed an inability to use bank examinations to distinguish between good and bad loans.

"Before the housing crisis, banking regulators were permitting financial institutions to lend to individuals who obviously did not have the ability to repay the money they borrowed. Had they been more vigilant, the crisis may have been less severe.

"Now, however, in seeking to be more cautious, bank regulators are making another mistake: They have been telling institutions in my home state of Arizona, and throughout the country, not to make loans to even the most creditworthy individuals and businesses. "I have heard numerous stories, from both lenders and borrowers in my state, about bank examiners deciding to downgrade a performing loan because, on paper, the underlying collateral was worth less than its purchase price.

"As a result, the banks had to either raise more money, which is incredibly difficult, or else the borrower had to contribute more cash to keep from technically defaulting on the loan.

"Why would we have policies that punish responsible borrowers? Why would it be in our interest to force those who are current on their loans into a situation that could lead to bankruptcy? Doing so makes a bad situation worse and creates problems that ripple through our economy.

"I am also troubled that Chairman Bernanke refuses to take responsibility for the housing bubble and disputes that the Federal Reserve's lax monetary policy helped create it.

"As the respected columnist Bob Robb of the Arizona Republic recently explained: "[Chairman] Bernanke is intellectually shadow boxing…. When a bubble occurs in a commodity which is almost universally purchased using extensive borrowing, such as homes, it's fatuous to claim that easy money doesn't play a significant role.'

"Chairman Bernanke strongly supported this lax monetary policy, and he should own up to its role in the financial crisis.

"These are all reasons to oppose his confirmation.

"Nonetheless, I must vote to reconfirm Chairman Bernanke. Simply because I am concerned that another nominee chosen by President Obama would be less independent than Chairman Bernanke and would direct the Federal Reserve's resources to support the administration's policy interests, and, therefore, bypass Congressional approval for appropriated funds.

"This administration has a history of nominating partisan, out-of-the-mainstream individuals for key jobs, and replacing Chairman Bernanke would be another opportunity for it to do so.

"I would hope that if Chairman Bernanke is confirmed, he will take action to remedy the problems I have just addressed. They demand his attention."

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