Ben Bernanke and Hank Paulson are currently testifying before the House about current economic conditions. Besides staring at Hank’s sports watch while a congressman complains about the scarcity of student loans, we’ve also been enjoying Bernanke’s back and forth with the representatives.
One congressman challenged Bernanke directly, attacking the federally-sponsored buyout of Bear Stearns and widening of the discount window as an unjustified use of taxpayers dollars and needling Bernanke about the mistakes made by the Fed in 1929. Another demanded that he wait for Congressional approval before organizing another buyout.

Ben was up to challenge: he said that Bear’s collapse posed systemic risk, specifically to the tri-party repo market, and contrasted Bear with Drexel. Bernanke said that he doesn’t want to take such extreme measures again, probably referring to the lengths he and Hank went to exclude Chris Cox from their 5am call. Bernanke, who after all is a specialist in the Great Depression, noted that another gross mistake by regulators was… failing to bail out firms whose collapse hurt market stability. Given that the first congressman placed blame on bad regulation and sounds like a Texan, he’s probably Jeb Hensarling, whose Dallas district may be hell on earth but has one redeeming value: my first girlfriend was from there.
Bernanke also argued against the assertion that the Fed’s balance sheet is dangerously depleted, contesting the idea that he would need to increase the money supply in order to fund demand at the discount window or backstop another buyout. He pointed out to committee members at various points that the SEC regulates investment banks, that the Fed could impose conditions on borrowers at the window, and that he hasn’t just been killing time since March, instead encouraging de-levering and recapitalization by financial firms among his other pastimes.
-Senior Beard ‘n Bald correspondent Andrew