In pointing out the ongoing difficulty with the economy, Federal Reserve Board Chairman Ben Bernanke stressed high unemployment and foreclosure rates. The foreclosure rate comment is particularly disturbing in that the Fed had made a point with its various emergency liquidity actions during the crisis that returning a flow of credit to American families and businesses was a priority.
While the Fed made sure the banks got theirs, there has been no sign of diligence from the Fed on the rest. Why didn’t someone ask Ben specifically what have you done to “restore the flow of credit to American families and businesses” or more specifically, why didn’t you make the largesse you offered the banking sector conditioned on restoring that flow of credit.
The troubled asset relief program (TARP) was passed to a great extent on Bernanke’s urging and one reason certain Congressman voted for it was to preserve home ownership. Neil M. Barofsky, special inspector general for TARP, noted in an op ed piece, “The legislation that created TARP, the Emergency Economic Stabilization Act, had far broader goals, including protecting home values and preserving homeownership. …Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the act expressly directs the department to do just that.”
Obviously this is an issue for Treasury but the Fed chief was paired at the hip with Treasury Secretary Hank Paulson in urging Congress to pass TARP and as mentioned above many in Congress voted for it based on a promise to modify mortgages. Remember the crisis in large part had to do with banks holding toxic assets of bundled below water loans. The banks got a do over but millions are still facing foreclosure based on unrealistic valuations that banks have already been compensated for. Now the banks are making record profits and foreclosures are still a drag on the economy. How could the two not have been tied together?
And any time Ben wants to talk about our “strong dollar policy” and how Fed policy has affected the dollar we will be willing to listen.