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Jim Bunning Nails it

Written By Brian Hicks

Posted July 15, 2008


Against the backdrop of an ongoing financial train wreck, Sideshow Ben was a bit of a downer this morning. His best laid plans in tatters, the Fed chief turned suddenly gloomy.

Long gone were those sunny days in June when the Sideshow told anyone that would listen that the threat of an economic downturn had diminished.

Instead, he told Congress this morning, “The economy continues to face numerous difficulties, including ongoing strains in financial markets, declining house prices, a softening labor market, and rising prices of oil, food, and some other commodities.”

And as a result he said there are now “significant downside risks to the outlook for growth” and that the “upside risks to the inflation outlook have intensified.”

It was pure brilliance I tell you from the smartest guy in the room and the market promptly cratered. The Great Oz had spoken.

But the real star of the show this morning was definitely Kentucky Senator Jim Bunning. He’s the pitcher turned politician.

He angrily beaned the Sideshow with one fast ball after another, openly questioning the credibility and mission of the Fed itself.

And when he was done he had pretty much nailed it by calling a spade a spade. It was a rare moment of candor.

Here’s the text of his stinging statement.


Bunning Statement To The Senate Banking Committee On The Federal Reserve Monetary Policy Report

“Thank you, Mr. Chairman. I know we have a lot of ground to cover today, but I want to say a few things on the topic of this hearing and of the next.

First, on monetary policy, I am deeply concerned about what the Fed has done in the last year and in the last decade. Chairman Greenspan’s easy money the late nineties and then following the tech bust inflated the housing bubble and created the mess we are in today. Chairman Bernanke’s easy money in the last year has undermined the dollar and sent oil to new record highs every few days, and almost doubling since the rate cuts started. Inflation is here and it is hurting average Americans.

Second, the Fed is asking for more power. But the Fed has proven they can not be trusted with the power they have. They get it wrong, do not use it, or stretch it further than it was ever supposed to go. As I said a moment ago, their monetary policy is a leading cause of the mess we are in. As regulators, it took them until yesterday to use power we gave them in 1994 to regulate all mortgage lenders. And they stretched their authority to buy 29 billion dollars of Bear Stearns assets so J.P. Morgan could buy Bear at a steep discount.

Now the Fed wants to be the systemic risk regulator. But the Fed is the systemic risk. Giving the Fed more power is like giving the neighborhood kid who broke your window playing baseball in the street a bigger bat and thinking that will fix the problem. I am not going to go along with that and will use all my powers as a Senator to stop any new powers going to the Fed. Instead, we should give them less to do so they can do it right, either by taking away their monetary policy responsibility or by requiring them to focus only on inflation.

Third and finally, since I expect we will try to get right to questions in the next hearing, let me say a few words about the G.S.E. bailout plan. When I picked up my newspaper yesterday, I thought I woke up in France. But no, it turns out socialism is alive and well in America. The Treasury Secretary is asking for a blank check to buy as much Fannie and Freddie debt or equity as he wants. The Fed’s purchase of Bear Stearns’ assets was amateur socialism compared to this.

And for this unprecedented intervention in the markets what assurances do we get that it will not happen again? None. We are in the process of passing a stronger regulator for the G.S.E.s, and that is important, but it allows them to continue in the current form. If they really do fail, should we let them go back to what they were doing before?

I will close with this question Mr. Chairman. Given what the Fed and Treasury did with Bear Stearns, and given what we are talking about here today, I have to wonder what the next government intervention in private enterprise will be. More importantly, where does it stop?”

It was priceless I tell you and dead on accurate in calling the Fed a systemic risk.

Jim Bunning for President