I had the chance to talk with Sen. Jeff Merkley (D-OR) this morning in a wide-ranging interview about Ben Bernanke, the Federal Reserve, financial reform and the utter dysfunction of the US Senate. Merkley, who woke up at midnight, went down to the Senate to vote on a defense bill, returned home and went back to sleep, and then got up for another workday, sounded nonetheless alert, and showed a great deal of conviction about his vote against Ben Bernanke yesterday in the Senate Banking Committee. What follows below is a rough approximation of Sen. Merkley’s comments (I need to figure out how to be on the phone and use the voice recorder on the phone at the same time):

FDL News: Why did you vote against Bernanke yesterday?

Merkley: The reason is that Bernanke was at the table through every mistake that was made that led us to the recession, and he missed everything. He was in on the decision not to regulate derivatives, he was there lifting the leverage restrictions on the five largest banks, he was there when mortgage lenders were using pre-payment penalties and yield spread premiums to hurt consumers. And Bernanke never saw the problem. I put it like this, Bernanke helped set a fire. And Bernanke was good with the fire hose, but in the future, do you want someone good with the fire hose, or do you want someone who won’t let the fire start again and who will rebuild the house? We need someone who’s more focused on Main Street and working families than Wall Street profits.

FDL News: It was an interesting vote, because you joined six Republicans and no other Democrats voting against Bernanke. Do you think you can encourage other Democrats to see things the same way as you do?

Merkley: Members of the caucus are coming to me asking me to explain my thinking, so I don’t think it will take much to start the dialogue. I don’t know that we will get a sizable Democratic opposition to the nomination, but I think some people will see it my way. (Members of both parties yesterday said they would reconsider his nomination on the Senate floor.)

FDL News: I wanted to get your take on something that went around the blogs yesterday. Bernanke was asked via questionnaire from Sen. Vitter whether he would be willing to set a 3% inflation target to stimulate spending and output, and he said that he wouldn’t because he feared the inflation risk. He basically was saying that he’s OK with high unemployment because of the threat of possible inflation down the road. Can you respond to this?

Merkley: As you know, the Federal Reserve has two missions: price stability and full employment. Most folks don’t realize that. You cannot have a Federal Reserve chairman who thinks everything’s OK if Wall Street’s OK. There’s too much at stake for our families.

We asked working Americans to bail out our financial industry. And in return, we should be focused on a lot of help for those families. We should be focused on foreclosures – the HAMP program hasn’t put a dent in this, I asked the Administration to commit billions to the program from TARP, they agreed to $50 billion, and they’ve spent $1 million. We should be focused on jobs, and rebuilding the economy. We shouldn’t judge our success by whether Wall Street has a good quarter.

FDL News: What do you think the prospects are for a decent financial reform bill? There has reportedly been some progress in the Banking Committee. What are you seeing?

Merkley: Well, Republicans walked away from the table, and then they came back, saying they had a lot of pressure from their leadership to walk away, but they thought this was important to get done. So that is promising. I’d love to have a bipartisan bill, but I’m concerned that a bipartisan efforts would roll over the top of American families, so I’d have problems with that.

FDL News: What would be important to you in a good financial bill?

Merkley: There’s a lot in the Dodd discussion draft that’s pretty good. First, systemic risk, and using an outside council to have an independent viewpoint outside the frame of the Federal Reserve. Then there’s the consumer protection agency. If you think about the Fed, monetary policy is in the penthouse, safety and soundness is maybe a couple floors below that, and consumer protection is deep in the basement. And yet Bernanke has been arguing to return consumer protection to the Fed. I think that’s wrong. The Consumer Financial Protection Agency would be a great tool to support competition. Lenders and banks shouldn’t compete on deceiving their customers to maximize profit, but should compete on service and price point. And a strong CFPA would allow that, and complement the capitalist system, much like the courts do.

Also, we want to rein in derivatives, and break the chain of risk, where a bad swap can reverberate throughout the entire financial system.

FDL News: Do you think the House bill does a good job on that?

Merkley: I don’t have a real good handle on the House bill. From what I understand, I think Dodd’s discussion draft is better. It’s a very complex system that’s hard to define, where do you draw the line on legitimate end-users without exempting most derivatives, how do you set up a proper clearinghouse and over-the-counter function. But I hope we can get it right.

The other thing we have to do is on proprietary trading. I think banks should be boring. They shouldn’t be taking our deposits and gambling with them, turning a bank into a hedge fund.

FDL News: Do you support what Maria Cantwell and John McCain introduced, restoring Glass-Steagall protections?

Merkley: I haven’t seen their language yet, but the principle of restoring Glass-Steagall and setting up that wall between investment and commercial banks is a good one.

FDL News: Do you think financial reform might be a way for Democrats to channel their inner populist a bit? It seems they’ve lost out to the tea parties in terms of setting up a dichotomy between working for the people and working for Wall Street. Shouldn’t you put each of these provisions on the floor for a vote so we can truly see who’s working for whom?

Merkley: That kind of sounds like what we did in the HELP Committee on the health care bill, where we broke it down and spent a week on each Title of the bill. There’s enough complexity in all of this stuff that I think it would be valuable. Of course, there are procedural difficulties that make it hard to break down a bill into discrete parts. When you pile everything together, the individual pieces don’t get a lot of attention.

FDL News: Let’s talk about those procedural difficulties. You’ve been in the Senate a year now. How do you think the process works?

Merkley: There’s no question that the Senate has become dysfunctional, and it’s not good for democracy. I think there are a lot of reasons for that. First, not a lot of folks know each other. We’re here three days a week and then back in our districts. Sometimes you need personal bonds to overcome that partisanship. I got to know people at the state legislature level just by sitting next to them in committees. And we could work together on issues and move things forward. There’s a lot of isolation in the Senate. I think there are a lot of reinforcing factors to the partisanship as well.

But there’s no question that the procedure itself is dysfunctional. I’m working with a colleague to come up with some ideas to improve that. It’s going to be a long-term project, because to change the rules around here takes 67 votes. But we’ve come up with some ideas. What if appropriations bills could be moved through an expedited process, with a timeline that would take two days for a vote rather than two weeks? And you could do the same thing with nominations. Right now, there are still hundreds of unfilled Administration positions, because the Republicans can obstruct them and eat up a lot of floor time, and it’s hamstrung these federal agencies. So maybe we could get some of the things we do expedited, with an up or down vote, even if it’s a super-majority, so we can clear the decks for a longer consideration of policy bills, because a lot of this is about time. And you can do that while protecting minority rights.

And then we’re thinking that we could sort of time-release a change to the cloture rules. Something where they don’t take effect until years down the road, or at a time when the parties are more equal in power. That wouldn’t look like short-term advantage while eventually moving away from the dysfunction. It’s worth having that discussion. But it’s going to take a while.