Wall Street More Terrified of Bernanke Than Al Qaeda?

This is a partial transcript from "Your World with Neil Cavuto," June 8, 2006, that was edited for clarity.

NEIL CAVUTO, HOST: Well, is Wall Street more terrified of this guy than anything Zarqawi could have dreamed up? Stocks getting in on the red. Also — we are showing "Cavuto on Business" here, but you get my point. We love to promote ourselves.

But, as all of our guests pointed out, there are a lot more fears about the Fed chief than anything going on in Iraq, and fears echoed by my next guest.

Joining me now is Senator Jim Bunning of the Senate Finance Committee, Republican of Kentucky.

Senator, you are worried about this guy, aren’t you?

SEN. JIM BUNNING R-KY: I have been worried when he was nominated and spoke out against his nomination, and have — I hate to say I was right, but, all a sudden, I have got a lot of colleagues in the Senate saying the same thing I said before he actually passed the Senate.

CAVUTO: I — I remember that quite vividly, Senator. And one of the things you raised at the time was — was this — this issue of — of this allegiance to — to inflation, at the risk of a — of a slowing economy.

I’m vastly oversimplifying things here. But what — what do you make of that argument now, that he seems to be erring on the side of fighting inflation than a slowing economy?

BUNNING: Well, I can remember Alan Greenspan doing the same thing twice, sending the economy into recession.

And I surely hope that Bernanke’s words two days, or three days ago, and then his change of position, and then becoming very hawkish on inflation, and then having it repeated by his nominee to be vice chairman of the Fed today, I hope they get a consistency. What has happened is that we have amateur hour at the Fed. And that is scary to the markets.

CAVUTO: But we always had that, right, Senator? I mean, we — they didn’t all speak out, but they certainly spoke out at the meeting. You guys in Congress wanted a — a more transparent Fed. And now you got it, right?

BUNNING: Well, I don’t think it’s more transparent. I think its more inconsistent. And — and that frightens the markets more than transparency.

(CROSSTALK)

CAVUTO: Well, what would you do? If — if — Bernanke is in there now. He is not going anywhere. What do you — what would you tell him to do?

BUNNING: I have already told him to keep his big mouth shut most of the time and only speak on monetary policy.

We even had the Fed — ex-Fed chairman up here yesterday, saying, you know, these oil prices have been here a while, and they are not going to have a dramatic effect on our economy. Alan Greenspan here before one of our congressional — congressional committees yesterday said that.

And we have lived with high energy prices. The Fed has to face up to the fact that inflation is not here. Why isn’t it here? Because the labor unit cost, which is the big gauge whether we have — going to have inflation now or down the road, has not done anything but decline.

CAVUTO: But — but — that might be so, Senator, but what the Fed has to do is make sure it doesn’t get to there. And if it’s starting in commodities and starting in things like energy and all these other things that have been...

(CROSSTALK)

BUNNING: But the fact is... (CROSSTALK)

CAVUTO: ... that its just a matter of time. That’s the ghost they have to chase. You argue it’s just that, a ghost, right?

BUNNING: Yes, but you know, you know factually, that the Fed has always overstepped, gone farther than it should...

CAVUTO: That’s true. Thats true.

BUNNING: ... and, in so doing, flipping the economy.

CAVUTO: OK.

Senator, I wish we had more time. Always good having you on. Thank you very, very much.

BUNNING: It’s great. Thanks.

CAVUTO: Senator Jim Bunning.

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