Federal Reserve Chairman Ben Bernanke could be facing a battle with congressional Republicans if he keeps calling for action, like he did Friday at a homebuilder’s conference where he said depressed house prices and sales were impeding economic progress.
“We need to continue to develop and implement policies that will help the housing sector get back on its feet,” Bernanke said, proceeding to highlight a few ideas from the recent Fed white paper on housing — a white paper that got him stuck in a death stare with a house Republican at a recent speech in front of the budget committee.
“I was taken aback when the Fed issued an unsolicited white paper on housing policy and it mirrored in many ways the administration’s policies on housing,” said Rep. Scott Garrett, R-N.J., comparing the move to the House instructing the Fed on monetary policy.
Republicans have long criticized overt action by the Fed, but the tension usually isn’t this high. With a struggling economy and a housing market that remains bottomed out, the GOP and the Fed may have the same goal of recovery, but they rarely agree on how to achieve it.
Quantitative easing has been a nagging issue between the two. In September, Speaker John Boehner and two other GOP leaders pulled an unprecedented move in writing the Fed a direct letter that stopped just short of telling them not to enact a third round of quantitative easing.
Given that the Fed openly admits this is still an option — even if it is controversial — Republicans are looking for ways to back the Fed down, or at least make it look like it is overstepping its boundaries. Focusing on the white paper is an effective way to do that, especially since it is the most direct call for action on housing from the Fed yet.
Bernanke, who continually hinted at tips he gave in the white paper at Friday’s speech, is not making any friends among Republicans, even if he did stick to the least controversial ideas. He asked lenders and regulators to examine practices that might slow the origination of less risky mortgages, blaming tight credit as a reason the recovery has been slow. This, added to the surplus of foreclosures and vacant homes, were Bernanke’s justification for a call to action.
In the days after it was released, Bernanke defended the white paper against attacks by saying it was nothing more than a list of suggestions for how to get things back on track, given that the Fed has a direct interest in boosting the housing market. That defense has done nothing for Republicans, who continue to protest the Fed as overly involved and Bernanke as meddling in things that are none of his concern.
He faces major complaints from the Republican candidates — none of whom are a fan of Bernanke. Mitt Romney and Newt Gingrich have openly said the chairman would be out of a job if they were elected, and Ron Paul is famous for wanting to do away with the Fed altogether.
Friday’s speech proves that Bernanke really just doesn’t care that much what Republicans have to say at this point, and the goal of boosting housing beats out his need to remain politically friendly. Republicans won’t be happy about what he said at the National Association of Home Builders conference, but perhaps that was decided before he even stepped onto the stage.
jhuseman@housingwire.com
