–Key Republican Senator: ‘Still Concerned’ About Q2
–Sen. Shelby: Bernanke Is ‘Experimenting’ and ‘Tinkering’ W/Econ
–Sen. Shelby: Fed Chief Believes Inflation It Tame
–Sen. Bayh: Bernanke Would Prefer Hill To Lead On Stimulus
–Sen. Bayh: But With Hill Stymied, Fed Chief Felt Need To Act
By John Shaw
WASHINGTON (MNI) – Sen. Richard Shelby, the ranking Republican on
the Senate Banking Committee, said Wednesday that Federal Reserve Board
Chairman Ben Bernanke explained and defended the Fed’s quantitative
easing policy in a private briefing to the Senate Banking Committee.
Shelby, speaking to a small group of reporters as he left the
session with Bernanke, said the Fed chief did not put to rest his
misgivings about Q2.
“I’m still concerned,” Shelby said, adding that the Fed has moved
into unchartered territory in its conduct of monetary policy.
“He’s experimenting … . He’s tinkering,” Shelby said.
Shelby said Bernanke made it clear that he believes the inflation
outlook is benign and that this is a time to focus on boosting growth.
Shelby said a number of senators in the Banking Committee had
questions and expressed concerns about the Fed’s recent policy steps.
Shelby said that Bernanke cited a report by the Boston Fed that the
Q2 policy could help boost the economy in a way by creating between
700,000 and a million jobs over two years.
Sen. Evan Bayh, a Democratic member of the Banking Committee, left
the same briefing with the clear impression that Bernanke would much
prefer that Congress “take the lead” in bolstering growth.
But with Congress stymied, the central bank believes it must do
what it can to boost the economy, Bayh said in summarizing Bernanke’s
argument.
Bayh said Bernanke has decided in the current environment to “err
on the side of growth” by implementing aggressive monetary policies.
But he said that Bernanke made it clear that he is monitoring the
economy carefully and is prepared to act quickly at the first signs of
inflationary pressures.
“He will not let that get out of control,” he said.
Bernanke did not speak to reporters.
On another matter, Shelby continued to state his “opposition” to
the nomination of Peter Diamond of MIT to become a governor of the Fed.
Shelby cited his “concerns” that Diamond does not have a background
in monetary policy and comes from the same district as another Fed
governor.
Shelby said he doesn’t know if Diamond’s nomination will come up in
the Lame Duck session, but hinted he is likely to try to block the
nomination.
“Do they have the votes? I don’t know. There are always surprises
up here,” he said.
The Senate Banking Committee voted Tuesday to approve Diamond to be
a governor on the Federal Reserve Board on a 16 to 7.
This was the second time the Banking Committee has approved
Diamond’s nomination this year. The Banking Committee approved Diamond’s
nomination in July on the same 16 to 7 vote.
At that time, Senate Republicans refused to waive a rule that
requires pending nominations to be returned to the White House if the
Senate is out of session for more than 30 days as it was this past
August and early September.
Obama resubmitted Diamond’s nomination in September.
In Tuesday’s vote, Shelby argued that Diamond is from the same Fed
district as Daniel Tarullo and charged this would be a technical
violation of the law.
Senate Banking Committee Chairman Chris Dodd responded by citing
the legislative history of the statute, arguing that the restriction
Shelby cited was never meant to be applied rigidly.
He identified seven examples in the last decade in which a Fed
governor’s residency would have been a technical violation of the law.
The opposition of a large block of Republican senators will make it
difficult for Diamond to win confirmation in the Lame Duck session.
Earlier this year, the Banking Committee and full Senate approved
the nomination of Janet Yellen to serve as vice chairman of the Fed and
Sarah Bloom Raskin to serve as a Fed governor.
** Market News International Washington Bureau: (202) 371-2121 **
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