Bernanke Talks Recovery as Congress Plays Politics
NEW YORK (TheStreet) -- Discussion between Federal Reserve Chairman Ben Bernanke and Congress on Wednesday displayed two different conversations.
Simply stated, House members' questions were political while Bernanke's answers were about monetary policy, and how to pull the world's largest economy out of its worst crisis since the 1930s.
Rep. Bill Foster (D., Ill.) asked Bernanke about immigration reform. Bernanke said the Fed had not looked extensively into the effects immigration reform might have on monetary policy.
Rep. Steve Stivers (R., Ohio) asked about bank regulations for community banks, and Bernanke said small financial institutions would not be exempt from the guidelines ostensibly followed by larger banks.
Many others questioned the possibility of hyper-inflation (Tuesday's June CPI report showed core inflation actually dipped from the prior month), unwinding the Fed's balance sheet (the Fed has outlined the prospect of tapering in 2013 and possibly ending monetary stimulus in 2014, but has reiterated it would not immediately unwind the positions) and the national debt.
Audiences may be uncertain as to why politicians on Wednesday asked many questions that don't pertain to monetary policy, or that the Fed chairman has already answered or that the central bank and masses of analysts and economists have addressed.
The point here is that members on the House Financial Services Committee are answering to constituents in their voting districts. Immigration reform right now is a huge political issue in Washington D.C. that has major implications on the economy and the 2014 midterm election. Local savers rely on community banks' operations, which are affected by government regulations set by lawmakers.
It's easier to understand this issue if we observe how a Republican and Democrats on the committee approached Bernanke's hearing.
Committee Chairman Rep. Jeb Hensarling's (R., Texas) district in Dallas tends to vote for Republicans (George W. Bush won the district in 2000 and 2004; John McCain won it in 2008), and residents there haven't voted for a Democratic representative in the district since the mid 1990s. The general stance among the Republican caucus in the House is that the Fed has overstepped its power, and is inflating the monetary base too much. This isn't to say everyone in Texas's fifth congressional district agree with House Republicans, but a majority of constituents there have voted for this thinking.