WASHINGTON — Bernanke and politics — oil and water.
Before he took over the Federal Reserve, Ben Bernanke told Congress he wanted to steer clear of politics. More than two years later, he’s knee deep in political mud as the Bush administration scrambles to breathe new life into a multibillion-dollar financial-bailout package on Capitol Hill.
In a series of high-stakes sessions over the past several weeks, Bernanke and Treasury Secretary Henry Paulson have sought to sell the administration’s $700 billion rescue package to skeptical lawmakers. After the House’s stunning defeat of the measure Monday, Bernanke and Paulson huddled in an emergency strategy session at the White House.
The worst financial crisis since the Great Depression has thrust Bernanke squarely into the political arena — championing in public appearances before TV cameras and closed-door meetings on Capitol Hill an unprecedented bailout that could put taxpayers on the hook for billions.
Bernanke’s journey from wanting to remain above the political fray to drowning in it underscores the grave economic situation the country faces. The conundrum confronting Bernanke: How far can you go in trying to save the economy, while at the same time not hurting the Fed’s independence?
“There is a very serious risk that the Fed compromises its independence with these moves, but I think the alternative is calamity,” said Richard Yamarone, economist at Argus Research.
A sober-faced Bernanke, a scholar of the Great Depression, told hostile lawmakers last week he wished the Fed — the lender of last resort — didn’t have to be so deeply involved.
“The Federal Reserve would like to get out of dealing with some of these crises we’ve been dealing with … and we prefer to get back to monetary policy, which is our function, our key mission,” he said.
Shortly after the Fed in March took the unprecedented step of helping to bankroll JPMorgan Chase’s takeover of investment house Bear Stearns, Bernanke told Congress it was meant as a one-time event.
“It has never happened before, and I hope it never happens again,” he said.
