Yesterday, I wrote that if Federal Reserve Chairman Ben Bernanke really wants to earn Person of the Year honors, he needs to do more to fight unemployment. Contrary to Alan Greenspan’s assertions, the Fed does have some more unemployment fighting tools in its arsenal (and a legal mandate to maximize employment, in addition to assuring price stability).

Via Matthew Yglesias and Free Exchange, the Wall Street Journal posted responses to questions Sen. David Vitter (R-LA) collected and sent to Bernanke. And Bernanke’s answer to an inquiry from Brad DeLong shows that he is well aware that he could do more to boost employment, but he isn’t planning to:

The Federal Reserve has not followed the suggestion of some that it pursue a monetary policy strategy aimed at pushing up longer-run inflation expectations. In theory, such an approach could reduce real interest rates and so stimulate spending and output. However, that theoretical argument ignores the risk that such a policy could cause the public to lose confidence in the central bank’s willingness to resist further upward shifts in inflation, and so undermine the effectiveness of monetary policy going forward. The anchoring of inflation expectations is a hard-won success that has been achieved over the course of three decades, and this stability cannot be taken for granted. Therefore, the Federal Reserve’s policy actions as well as its communications have been aimed.

As Free Exchange put it, “I can’t imagine getting a more direct answer from the chairman than that. Mr Bernanke does not want to risk a de-anchoring of inflation expectations. He is willing to accept 10% or greater unemployment and the resulting economic and political fall-out in order to avoid that risk.”

Bernanke’s nomination for a second term was approved by the Senate Banking committee today on a 16-7 vote, with six Republicans and Sen. Jeff Merkley (D-OR) voting against. While most of the rhetoric coming from those voting “no” had to do with the Fed’s lack of transparency or roll in the housing crash (both legitimate concerns), Merkley couched his criticism in terms of unemployment and a complacency towards Main Street. “Following our economic collapse, it is also apparent that [Bernanke] has not changed his overall approach to prioritizing Wall Street over American families,” Merkley said. Sen. Sherrod Brown (D-OH) made many of the same points as Merkley, but still voted for Bernanke.

As Yglesias put it, “unemployment is high in large part because the policymakers with primary responsibility for achieving full employment don’t want to use the tools at their disposal to achieve that goal.” Bernanke really needs to be pressed on why that is.

Today, Senate Banking Committee Chairman Chris Dodd (D-CT) and ranking member Richard Shelby (R-AL) said that, while they still have “a number of issues to resolve,” negotiations regarding financial regulatory reform are “going great.” “My hope is when we get back in January, that we’ll — depending on how the progress is moving — schedule a markup in the committee,” Dodd said.

Shelby added, “I think we have an opportunity between now and January, over the holidays, to come closer together. I hope we will in a bipartisan way.” But one of the sticking points in the regulatory reform effort continues to be the Consumer Financial Protection Agency (CFPA) which Republicans and many conservative Democrats are standing against. Shelby has previously called the CFPA “folly and dangerous,” and today he provided some insight into his reasoning:

”From the beginning I’ve always thought that we should not create a stand-alone consumer financial authority,” Shelby said this week. ”Safety and soundness (of banks) should be number one.”

So like Rep. Jeb Hensarling (R-TX), Shelby seems to believe that banks ought to trump consumers. But his alternative — leaving responsibilities for consumer protection with the existing bank regulators — essentially condones the status quo.

Shelby’s stance is especially interesting considering his vote today against confirming Federal Reserve Chairman Ben Bernanke for a second term. Under the GOP’s regulatory reform plan — which simply tells the regulators to get their act together and protect consumers — the Federal Reserve, of which Shelby seems to think so little, will not have any of its consumer protection powers removed.

As I’ve pointed out before, there’s a tension between the safety and soundness of a financial institution and consumer protection, because the same actions that are best for a banks bottom line are often the worst for consumers. Would predatory lending be a problem if it weren’t profitable? A new agency that is focused on consumers and can stand on equal footing with the bank regulators is a vital part of the regulatory reform effort.

On a grander scale, though, Shelby’s statement is emblematic of the GOP’s attitude toward regulatory reform. The financial crisis occurred barely more than a year ago, and yet no Republican voted for the House’s reform bill, and Dodd’s ambitious initial legislation is being pared back. And all because banks “should always be number one.”

Earlier this month, Sen. Jon Kyl (R-AZ) warned that Democrats would be in for a “rude shock” when they tried to extend the estate tax, which due to a Bush budget gimmick is scheduled to disappear in 2010. The House has already passed a permanent extension at the 2009 level, which is 45 percent with a $3.5 million exemption ($7 million for a couple), and the Senate, led by Sen. Max Baucus (D-MT), tried yesterday to put in place a temporary extension at the same level.

But Senate Minority Leader Mitch McConnell (R-KY) and Sen. Jon Kyl (R-AZ), in their zeal to cut taxes for the very wealthiest Americans, blocked the extension, and pushed for repealing the estate tax entirely. Watch it:

So at the same time that they’re decrying the deficits and debt (that they largely caused) and demanding the creation of an inevitably ineffectual budget commission, Republicans saw fit to push for a tax cut for the very wealthiest Americans. And make no mistake: despite all of the GOP’s references to “small businesses” and “family farms,” trying to cut the estate tax is flacking for the heirs of the very largest estates in the country, the Paris Hiltons of the world.

99.8 percent of estates in the U.S. are exempt from the estate tax at 2009 levels, and as Chuck Marr of the Center on Budget and Policy Priorities pointed out, “many more farm and business estates of people who die in 2010 will face tax increases than tax cuts if Congress allows the estate tax to expire.” “Under current law, many of these people pay no estate tax, and their capital gains taxes on that appreciated value are forgiven at death. But if the tax expires, their heirs could face capital gains taxes on the increase in the value of assets they may have acquired years or even decades ago,” Marr wrote.

Kyl actually said that the problem with the estate tax “doesn’t have to exist if [Democrats] will just leave the existing law alone.” Well, under the existing law, the estate tax is scheduled to return in 2011 at a 55 percent rate, with a $1 million exemption. So is Kyl endorsing that? Were it coming down the pike, I suspect Kyl would be right back on the floor, railing against leaving the existing law alone and pushing for more tax cuts for the mega-rich.