Should Ben Bernanke Be Impeached?

Over at his Economics One Blog, (link no longer available) economist John Taylor discusses a recent speech by the former Wells Fargo Chairman and CEO Dick Kovacevich, who explains how he was forced to take TARP funds by U.S. Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke:

In his speech, Kovacevich first described how he and the other bankers were told at that meeting that they had to accept the funds. He then paused and said to the Stanford audience: “You might ask why didn’t I just say no, and not accept TARP funds.” He then explained: “As my comments were heading in that direction, Hank Paulson turned to Chairman Bernanke, who was sitting next to him and said ‘Your primary regulator is sitting right here. If you refuse to accept these TARP funds, he will declare you capital deficient Monday morning.’ This was being said when we were a triple A rated bank. ‘Is this America?’ I said to myself.”

At that time Wells Fargo was in process of acquiring Wachovia and such a declaration would have killed the deal. According to Kovacevich: “It was truly a godfather moment. They made us an offer we couldn’t refuse.” It was also truly a deviation from the principles of economic freedom, such as those I have highlighted in my book First Principles—predicable policy, rule of law, reliance on markets, limited scope for government. One can debate whether those deviations were appropriate, but they were clearly deviations.

During the question and answer period after his talk, I asked Dick Kovacevich why more business people were not speaking out on this important issue. He explained how he had in fact waited a long time after he left Wells Fargo before speaking out because he did not want to risk some kind of retribution. He said he thought many others had a “fear” of speaking out.”

Obviously, this is reprehensible.  It clearly indicates how big government can stifle freedom.  But the more interesting question for me is whether these are impeachable offenses.

Let us assume, as seems evident, that Paulsen was threatening to take government action for illegitimate and illegal reasons.  If the government had declared Wells Fargo capital deficient and somehow explained the reasons for its decision, the action would be illegal and would be declared so by a court in a heart beat.  Presumably Paulsen’s action here – threatening to engage in an illegal action if someone does not agree to one’s request – might violate other civil or even criminal laws unless there are special exceptions for government officials.

There is some controversy about whether a government official must violate the law in order to have committed an impeachable offense.  It is my impression that a majority of scholars who have studied the matter hold the view that the official need not violate the law so long as he violates an important norm of government action.  If one assumes the truth of Kovacevich’s account, Paulsen’s action certainly violates an important norm of government action.   But Paulsen is no longer “a government servant.”

If Paulsen is arguably guilty of an impeachable offense, then what about Bernanke?  He sat there and allowed Paulsen to claim that he, Bernanke, would take an illegal action unless Wells Fargo took the action both Paulsen and Bernanke wanted it to take.  Since the two of them were representing the government in the meeting and were speaking for one another, it is easy to conclude that they were engaged in a joint enterprise.  Thus, I think there is a reasonable basis for concluding that Bernanke is also guilty of an impeachable offense.

So why doesn’t the House now undertake an investigation to determine whether to impeach Bernanke?  Well, I suppose there are numerous reasons, including the political one that Paulsen and Bernanke were Republican appointees.  Still, one would hope that the more anti-big government faction of the Republican Party in the House — the Representatives associated with the Tea Party, and Ron Paul, who still sits in the House — would consider the action.  It would both serve the cause of freedom and help to show the dangers of big government by both parties.

Reader Discussion

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on August 08, 2012 at 10:05:58 am

It is highly likely that Wells Fargo was capital deficient at the time. The acquisition of Wachovia probably made it more so. So the whole question is moot.

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on August 08, 2012 at 10:08:42 am

It is highly likely that Wells Fargo was capital deficient at the time, so the question is moot.

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on August 08, 2012 at 18:04:43 pm

After decades of compromise on the part of businessmen to acquiesce toward government control,taxation and regulations what does one expect. Today there are so many rules and regulations in the Federal Registry that objective and fair interpretations of those laws and regulations is nearly impossible. This is done on purpose.Tacitus once said "the more laws the more corruption." Our Republic is long gone and we now live in a very corrupt nation. We do not live in a society of neutral law interpreted by neutral judges. We live in a society of powerful ,ambitious and megalomaniac men who want to control and run the world. The Paulsons,Bernankes,and Geithners of the world have been bought and paid for by the Elitist /Globalist cabal of one world government, new world order idealism. By having control of the money,banking,regulatory and tax system people like Mr.Kovecevich can easily be controlled. Can you imagine what powerful men can do to keep businessmen in line. Just the words "IRS Audit" would send a chill down most businessman's spine. Of course there are a few brave men and women who have stood up to government tyranny. Many went to jail a few were killed but most,not all,were ruined. That,sometimes, is the price of Liberty. Freedom does not come easy.

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libertarian jerry
on August 09, 2012 at 07:30:31 am

I very much doubt anybody has to worry about impeachment, much less during a Democratic administration. Look at the lesson of the Clinton impeachment: Sure, he got impeached, which is to say, charged. (Though the most explosive charges available were deliberately spiked; Who can forget that climactic vote to hold a thorough investigation covering all issues? Followed by a midnight leadership decision to kill the investigation and drop almost all charges?) But the Senate, due to institutional hubris, would not permit the House to actually conduct the trial prior to the vote. It was beneath their exaggerated dignity to subject themselves to mere House members presenting evidence. While those who furthered the impeachment were themselves targets of successful retaliation. Perhaps successful because they themselves were scum, but that's no reason for present leadership to feel secure!

No reason to suppose another impeachment wouldn't go down in a similar manner. Thus, it won't happen.

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Brett Bellmore
on June 07, 2013 at 11:22:47 am

Hi there, just wanted to tell you, I liked this blog post. It was helpful. Keep on posting!

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Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.