Their opposition isn't likely to derail the Bernanke nomination, but it represents some of the most concerted opposition the central bank has seen in decades. And, dovetailing with the aftermath of a severe financial crisis, it could potentially result in new constraints on the Fed.
From the political left, Sen. Bernie Sanders of Vermont is refusing to back Mr. Bernanke for another term, and has put a hold on the nomination. That's a Senate procedural maneuver that makes the approval process harder. Senator Sanders, an independent, is considered politically way left of most Democrats.
On the opposite front politically, House Rep. Ron Paul (R) of Texas has a view that's way right of most Republicans: His trust in free markets and advocacy of a gold standard for the US currency prompts him to argue that the Fed shouldn't exist at all.
Representative Paul, who garnered a passionate national following in his unsuccessful bid for the Republican presidential nomination in 2008, doesn't have a direct say on Bernanke's nomination. But a bank-reform bill that's moving to the House floor for debate includes a Paul-backed provision for Congress to audit the Fed.
He sees it as a first step toward persuading his colleagues that the central bank's efforts to manage the economy by manipulating interest rates are ineffective or even harmful.
Critics: Fed helped create crisis
In a year following the near-collapse of the US financial system, and massive rescue actions by the Fed, these two lawmakers aren't the only ones with questions and concerns about the central bank. But they have issued some of the bluntest criticism.
"The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen," Paul said in a July House committee statement.
"The American people overwhelmingly voted last year for a change in our national priorities to put the interests of ordinary people ahead of the greed of Wall Street and the wealthy few,” Sanders said this week in announcing his opposition to Bernanke. “What the American people did not bargain for was another four years for one of the key architects of the Bush economy.”
Their criticism taps into a wider base of public opinion.
Recent polling by Gallup shows that Americans have become less enamored of the Fed since last year's financial storm. In 2003, some 53 percent of Americans rated the Fed as doing an "excellent" or "good" job. In July this year, only 30 percent of the public felt that way. About one-third of respondents gave the Fed a "fair" rating, while 22 percent said it's doing a "poor" job.
The Fed's foes say it helped to create the crisis - with easy monetary policy or lax supervision of banks.
Fed resists new audit system
Defenders of the Fed say a range of other factors also caused the crisis, and that Bernanke's crisis-response is helping to restore financial stability. The Fed made some errors, they say, but the US had severe financial crises before the Fed existed. Many economists say the Fed is the logical institution to play a new role as watchdog against "systemic risks" across the financial sector.
The opposition from Sanders, Paul, and others comes as Congress appears poised to reconfirm Bernanke and to expand the Fed's power as a regulator. The Fed’s defenders also worry that a new audit system could erode the Fed’s independence from political pressure in setting monetary policy.
In his Senate testimony on Thursday, Bernanke argued against the idea of new audits on the Fed’s monetary policy. He said the Fed is transparent about its overall balance sheet and financial activities.
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