Congress Hijacks Ben Bernanke Testimony With Libor Questions

Karen Bleier | AFP | Getty Images

U.S. Federal Reserve Board Chairman Ben Bernanke arrives to testify at the Senate Banking, Housing and Urban Affairs Committee on Capitol Hill.

Don't know if you've listened to the Ben Bernanke testimony, but it has been a strange one. Strange because Mr. Bernanke was pelted by questions on Libor — and I don't mean one, I mean many.

There have even been some vague questions asking why U.S. regulators, including himself, weren't more aware of what was going on. (See -NetNet: Congress, Not the Fed, Should 'Get to Work')

Why the obsession with Libor when the country is in a serious economic crisis?

To some extent, it can be framed as a populist issue. "Congress is 'protecting' its constituents," one trader said to me. "Libor affects our borrowing rates and even mortgage rates."

That's true, but a larger answer is simple politics. Here's another way to show that: 1) regulators (under the Obama administration) have been asleep at the wheel, and 2) the financial community is a never-ending source of corruption.

And putting a focus on Libor is also a way of deflecting the Congress' inaction on the fiscal cliff. Sen. Chuck Schumer (D-NY) said as much during his questions. Notice how the fiscal cliff did not come up that often, even though Bernanke mentioned it several times: the "recovery could be endangered by the confluence of tax increases and spending reductions that will take effect early next year if no legislative action is taken."

You would think he would be pelted with many more questions on QE3 (quantitative easing) and the economy. Mr. Bernanke clearly indicated the economy was weaker in Q2: "economic activity appears to have decelerated somewhat during the first half of the year."

Or how about elaborating on this remark: "Forward-looking indicators of investment demand—such as surveys of business conditions and capital spending plans—suggest further weakness ahead."

Most importantly, he indicated that GDP might be below 2 percent in the second half of the year. All of this are hints that QE3 might be coming, but is not imminent.

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