Executive Session

Floor Speech

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Mr. WHITEHOUSE. Mr. President, I wish to comment today on the nomination of Ben Bernanke for a second term at his critical post on the Federal Reserve.

As our Nation continues to recover from the worst financial crisis since Black Tuesday in 1929 and the deepest recession since the Great Depression, the chairman of the Federal Reserve is one of the most important positions in the Federal Government.

Earlier this month, Goldman Sachs--the Wall Street behemoth--announced a bonus pool of $16.2 billion. JP Morgan recently handed out a $9.3 billion set of bonus payments. The Wall Street Journal reports that Bank of America is expected to match the bonus level that it paid in 2007--prior to the collapse of the financial bubble and the taxpayer bailout.

These bonuses make it clear that Wall Street has recovered from the economic downturn--a recovery further indicated by the TED spread, which fell today to 0.17, signaling recovery for the banking system.

In contrast to the restored prosperity being enjoyed on Wall Street, Americans on Main Street still struggle through the aftermath of the Bush recession. Unemployment nationwide hovers around 10 percent. In some especially distressed areas, such as my State of Rhode Island, the employment situation is even worse. Rhode Island's official unemployment rate was 12.9 percent last month and the proportion of Rhode Islanders who are underemployed, working part time, or at jobs below their skill level is considerably worse than that.

Families in my State and across the Nation are struggling to pay for groceries and to stave off foreclosure. The economic distress is so widespread in places such as Rhode Island that hardly anyone remains untouched, directly or indirectly. It is heartbreaking to drive around parts of Providence, where nearly every house on the block is boarded up, where families have been evicted from their homes, and the neighborhood is now in physical decay. The explosion of the housing bubble left wreckage across this Nation, which will take years, perhaps even decades, to clean up.

Ben Bernanke bears considerable responsibility for the lax regulation that brought about the housing bubble. There is no mea culpa he can profess that will erase that fact from history. And to make matters worse, a quick review of his public statements in the months leading up to the crisis demonstrates a troubling pattern of false confidence.

On February 27, 2008, months before the start of our great recession, Chairman Bernanke said this:

The nonfinancial business sector remains in good financial condition with strong profits, liquid balance sheets, and corporate leverage near historic lows. ..... By 2010, our most recent projections show output growth picking up to rates close to or a little above its longer term trend, and the unemployment rate edging lower.

Here we stand in 2010, and it could not be more clear that Mr. Bernanke was wrong.

Regarding the housing crisis, on May 17, 2007, Chairman Bernanke said:

We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.

Again, he could not have been more wrong.

Regarding the strength of our financial sector, on February 28, 2008, Chairman Bernanke said:

Among the largest banks, the capital ratios remain good and I don't expect any serious problems.

We need a Fed Chairman with the foresight to anticipate problems and to take action before they occur. Chairman Bernanke has clearly not demonstrated this capability.

As the President of the United States noted in his State of the Union Address last night, the bank bailout was about as popular as a root canal. It appears Chairman Bernanke will be reconfirmed, but I want to express with my vote that the leaders of President Obama's economic team must pivot from the necessary rescue of our major financial institutions to equally if not more necessary help to America's families.

In prioritizing the recovery of Wall Street, I believe leaders at the Fed and the Treasury made significant errors in several key areas:

First, failing to establish a due process mechanism to legally make adjustments to Wall Street pay, bonuses, and counterparty liabilities, so they all had to be paid 100 cents on the dollar.

Second, hoarding the TARP reserve for banks, long after banks were secure, when families were desperate for help. But, no, they clung to that reserve just in case the banks needed it, never mind the present need of American families.

Third, allowing the banks to prevent families--and this Chamber fighting against it--access to bankruptcy courts to readjust their home mortgage debts the way any other debtor can do for any debt, including the big banks themselves.

Fourth, giving banks and investment banks unlimited access to zero-percent loans at the Fed window to use for arbitrage, while profitable small businesses are desperate for credit to use for jobs. Other nations--the UK and France--have announced special taxes on banker bonuses to help pay for bailouts. Not here. If you are a scorekeeper of our recovery, it looks as if it can be summarized in a two-word phrase: bank wins. That is not a balanced score.

I will conclude by saying that whoever leads the Fed for the next 4 years, I urge that we start prioritizing help for the middle class. The Fed has enormous powers that could be used to help people. It can regulate credit card rates. It can force big banks to reduce principal on underwater mortgages. It can provide credit to small businesses. If our Nation's central bank is to regain the confidence of the American people, its priorities must serve the American people.

I thank the distinguished chairman. I yield the floor.

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