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'Ben Bashing' Begins As Sarah Palin, Newt Gingrich Take On Bernanke

First Posted: 11/09/10 09:25 PM ET Updated: 05/25/11 07:10 PM ET

Palin Bernanke

WASHINGTON -- Ben Bashing has begun, and this time it's not a fringe issue, but a central focus of our frightened, blame-spreading Great Recession politics.

At this point in America, you can tell when a new Enemy of the People has arrived: when Sarah Palin and Newt Gingrich race onto Twitter to denounce him.

They've now done that to Ben Bernanke, and the whole flock of Republican presidential wannabes is sure to follow.

In the old days, which is to say before September 2008, anger about and interest in the Federal Reserve Board and its chairman -- and his predecessor, Alan Greenspan -- were pretty much confined to gold bugs, the financial press and libertarian conspiracy theorists.

No more.

The tea party itself -- judging from its 10-point "Contract From America," at least -- did not make the Fed a top concern; they were focused on spending issues.

But the tea party tide also swept in numerous libertarian hard-money types and fellow travelers, a cadre soon to grow. They hate the very idea of the Fed, not to mention Bernanke's activism in running the place.

Bernanke, originally nominated by President George W. Bush, was re-upped by President Barack Obama -- and reconfirmed against the will of most Senate Republicans.

That math gives the GOP room to add Bernanke to their target list, as someone fresh to blame along with Obama, Reid and Pelosi for continued economic stasis.

Bashing Ben can serve both parties' interests. For Republicans, it's easier and safer than making the hard fiscal decisions -- that is, to cut popular spending programs or raising income taxes -- which might do what the tea party says it wants to do, cut the debt.

And Democrats, whose stimulus package probably wasn't targeted enough and who relied on the kindness of strangers -- that is, Wall Street banks -- need someone to blame other than themselves and Obama.

All of which makes Bernanke vulnerable. And he is especially so because his job and the Fed he runs were created nearly a century ago to be above and beyond politics.

They no longer are. The change was inevitable, perhaps, given the aggressive, unprecedented steps that Bernanke took in the name of rescuing the economy.

But the very aloofness which was his strength as he acted then can become his and the bank's undoing now. How many friends do they really have in the scared capital?

In other words, this is the Ron Paul moment. He used to be considered a crank. But now the Texas gold-standard crusader who wants to abolish the Fed entirely -- or, at the very least, perform a public, full-body-cavity search on the bank -- will, with the Republican House victory, become chairman of the subcommittee that overseas domestic monetary policy.

This is the equivalent of putting Col. Sanders in charge of enhancing the longevity of all the chickens in Delaware.

Rep. Paul will have a family friend and ally -- his son, Rand Paul of Kentucky -- running loose on the Senate side, where he will join senators such as Tea-publican DeMint of South Carolina and Socialist Bernie Sanders of Vermont in demanding a Fed audit.

Paul's aide, Jesse Benton, told me "Paul supports a full and immediate audit," as in the DeMint-Sanders bill.

Elsewhere, in the new GOP-led House, expect California Rep. Darrell Issa -- man of a thousand subpoenas -- to continue his feud with the Fed, which began last year when the bank refused to turn over documents pertaining to its actions in bailing out the massive insurance company AIG.

Issa is all but certain to demand more numbers, on that and other Fed-related issues. "We certainly weren't shy about pursuing more Fed transparency" in the AIG matter, Issa aide Kurt Bardella said.

Fed officials dread the idea of a full-blown public audit, which they say would disclose easily-distorted numbers and undercut the secrecy the bank needs to positively influence global finance and currency flows.

But spreading the system's numbers on the table could also expose: the existence and extent of Fed positions in certain undisclosed entities; the Fed's role in pumping money into banks that are not lending much out; and some loans that most non-experts -- i.e. most voters -- might find less than reassuring.

In other words, the audit would plunge the Fed directly into electoral politics and into the control of members of Congress. And that, in turn, would ruin the Fed that was envisioned by its founders in 1913, the source of stability and independent reason in the determining the supply of money -- the wild fluctuations in which had bedeviled or economy from the start.

Some of the political questions Bernanke now will be asked -- and asked vehemently -- are legitimate, such as: How come the big banks we saved aren't lending more money to homeowners and small business? Why is the Fed buying $600 billion in mid-range Treasury notes when banks are investing in them just to safely fatten their portfolios -- and are not lend money?

Other questions will move the debate towards the apocalyptic, or worse: Is the Fed catastrophically debasing the currency? Is this a prelude to hyperinflation? Is there a conspiracy at work to somehow enslave America for the benefit of unseen forces.

A few years ago, we wouldn't have been talking about any of this. It would have seemed too technical or abstruse or fringe -- or all three. But a few years ago seems a very, very long way away.

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