The Fed chief promised, said Mr. Reid, that he would "redouble his efforts" to make credit available and that Mr. Bernanke "has assured me that he will soon outline plans for making that happen, and I eagerly await them."
Redouble? The Fed has already kept interest rates at near zero for more than a year, and it is buying $1.25 trillion in mortgage-backed securities to refloat the housing bubble, among other interventions into fiscal policy and credit allocation. Is the Fed going to buy another $1.25 trillion, or promise to keep rates at zero for another 14 months?
Mr. Reid's declaration of a confirmation quid pro quo will not reassure global investors who already fear that the Fed lacks the political will to withdraw its historic post-crisis liquidity binge soon enough to avoid new asset bubbles.
Our own view is that Mr. Bernanke is already far too susceptible to political pressure. As a Fed governor, he was Alan Greenspan's intellectual co-pilot last decade when their easy money policies created the housing mania. When Congress later put political pressure on the Fed to direct credit toward housing, and even to student loans, Mr. Bernanke (who was then chairman) also quickly obliged.
More ominously for the next four years, Mr. Bernanke continues to deny any Fed monetary culpability for creating the mania. Shortly after the New Year, even with his nomination pending, Mr. Bernanke issued an apologia that was striking for its willingness to play to the Congressional theory of the meltdown by blaming bankers and lax regulators. We won't rehearse our decade-long monetary argument with Mr. Bernanke today—see "Bernanke at the Creation," June 23, 2009. But the chairman's refusal to acknowledge any mistakes is one reason the dollar is so weak in global capital markets. Investors are hedging their bets in commodities and nondollar assets.
Zimbabwe Ben will likely win confirmation because he is not an independent nor serious Fed chairman. He's sucking up to Congress, promising to print as much as they want.