The hearing focused on the proposed renomination of Ben Bernanke as Federal Reserve Chairman will be held on December 3, 2009. I am surprised that President Obama still supports this guy.
The Cunning Realist, thoughtful as always, has prepared a list of questions that the legislators owe it to their constituents to ask Bernanke. Read the whole list.
Here is a sample.
Derivatives such as credit-default swaps played an important role in the financial crisis, and they are central to the financial reforms currently being contemplated. During the Senate Banking Committee’s hearing in November 2005 to confirm you as Alan Greenspan’s successor, you had the following exchange with Senator Paul Sarbanes [source]:
SARBANES: Warren Buffett has warned us that derivatives are time bombs, both for the parties that deal in them and the economic system. The Financial Times has said so far, there has been no explosion, but the risks of this fast growing market remain real. How do you respond to these concerns?
BERNANKE: I am more sanguine about derivatives than the position you have just suggested. I think, generally speaking, they are very valuable. They provide methods by which risks can be shared, sliced, and diced, and given to those most willing to bear them. They add, I believe, to the flexibility of the financial system in many different ways. With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly. The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well managed and do not create excessive risk in their institutions.
How did you get it so wrong?
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