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12-16-2009, 06:16 AM
Bernanke Foes Seek to Curtail Fed

Some Senators Plan to Use Debate on Nomination to Push Audit Measure


Ben Bernanke is widely expected to win Senate approval for a second term as Federal Reserve chairman, but opponents are hoping to use the debate on his nomination to curtail his autonomy at the central bank.

The Senate Banking Committee is poised to clear Mr. Bernanke's nomination on Thursday, sending it to the full Senate for a vote. Several lawmakers plan to use the proceedings to gain momentum for a bill that aims to subject the Fed's monetary-policy making to congressional audits.

The measure, crafted by Sen. Bernie Sanders (I., Vt.), mirrors one written by Rep. Ron Paul (R., Texas) that was included in the House's overhaul of financial-industry regulations passed last week.

Republican Sens. Jim DeMint of South Carolina and David Vitter of Louisiana have vowed to block Mr. Bernanke's confirmation until the full Senate considers the audit legislation, which has been co-sponsored by about a third of the Senate.

Mr. DeMint said Tuesday that he thinks the measure, which has steadily gained support among lawmakers, would pass if it came to a full Senate vote.

"It would surprise me if very many people would be willing, in public, to vote against the audit," Mr. DeMint said. "Americans don't trust the Federal Reserve," he said. It has expanded its "mission well beyond anything that was ever discussed."

The top Republican on the Banking Committee, Sen. Richard Shelby of Alabama, declined to disclose whether he will back Mr. Bernanke for another term. But he said he would "absolutely" support the audit provision.

"I'm for an independent Fed on monetary policy," Mr. Shelby said, "but they should have nothing to hide."

Mr. Bernanke has fought the audit bill for months, contending that it would constitute a congressional takeover of monetary policy. Most of the Fed's other operations, such as bank supervision and consumer protection, are already subject to audits by the Government Accountability Office, an arm of Congress.
Fed Scorecard

Senate votes to confirm past Federal Reserve chairmen

1979 Paul Volcker 98-0

1983 Volcker 84-16

1987 Alan Greenspan 91-2

1992 Greenspan unanimous consent

1996 Greenspan 91-7

2000 Greenspan 89-4

2004 Greenspan voice vote

2006 Ben Bernanke voice vote

2010 Bernanke ?

Monetary-policy deliberations, such as interest-rate decisions and related actions, have been excluded from audits since 1978 to prevent political interference at the Fed.

Mr. Bernanke was first appointed by former President George W. Bush and was nominated for a second four-year term by President Barack Obama.

In opposing the movement to audit the Fed, Mr. Bernanke has the backing of some senior lawmakers and numerous academic economists.

Sen. Judd Gregg (R., N.H.), among the Fed's fiercest defenders on Capitol Hill, has vowed to fight the audit legislation. He noted that the measure has not attracted the level of support in the Senate that it has in the House, where two-thirds of lawmakers co-sponsored the provision.

House lawmakers who support broader auditing of the Fed are engaging in "rampant pandering populism," Mr. Gregg said. "I don't think the Senate is at that point. I think there's a much more logical and thoughtful approach over here. And people recognize that having Congress involved in monetary policy is a disastrous idea."

But the audit legislation has drawn backers from across the political spectrum, including Mr. Sanders -- among the most liberal lawmakers in Washington -- and conservatives such as Messrs. Paul and DeMint.

Grassroots activists from the left and the right are lobbying lawmakers intensely to keep the audit provision alive.

On Tuesday, 17 organizations ranging from the liberal consumer group Public Citizen to the conservative activist group FreedomWorks asked Senate Banking Committee members to delay the panel's vote on the nomination until Mr. Bernanke's record receives further discussion and the audit legislation gets a stand-alone vote in the full Senate.

"We simply cannot go through the worst financial crisis in generations and rubber stamp the nomination of the chairman who was at the helm when the ship hit the iceberg," they wrote.

In 2006, the Senate confirmed Mr. Bernanke for the Fed job by a voice vote. The last time a nominee for Fed chairman drew substantial opposition was in 1983, when 16 senators voted against giving Paul Volcker a second term after he raised interest rates to double digits to thwart inflation.

Write to Sudeep Reddy at sudeep.reddy@wsj.com