Orbital Matters

Saturn Smith
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AUGUST 25, 2009 1:03AM

Bernanke To Be Reappointed Fed Chairman

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I'm a little surprised but ultimately pleased to see that President Obama will apparently announce tomorrow that he's reappointing Ben Bernanke as the chairman of the Federal Reserve.  Bernanke's first term ends in 2010; he was appointed by President Bush in 2006.  The New York Times:

“The president thinks that Ben’s done a great job as Fed chairman, that he has helped the economy through one of the worst experiences since the Great Depression and that he has essentially been pulling the economy back from the brink of what would have been the second Great Depression,” the White House chief of staff, Rahm Emanuel, said Monday night.


[A] senior official said Mr. Obama did not offer the job to anyone else, even though a number of high-powered Democratic economists were considered potentially strong candidates to replace him.

Why "pleased"?  Because those "high-powered Democratic economists" are contained within one man: Larry Summers.  Now, I'm not a big Summers basher (some would even call me a fan), but I don't think the guy, brilliant as he may be, is in any shape politically to be the Fed Chair.  Bernanke, by contrast, has the support of many, many economists, and has proven at least an admirable flexibility of understanding that his predecessor didn't have.

Why else am I pleased?  Because I hold the same rule for Brad DeLong as he holds for Paul Krugman1, and Brad DeLong is quoted in the AP's story as saying he can't think of anyone better for the job. 

So, why surprised, then?  Bernanke doesn't come without risks or detractors -- in fact, I'd bet a few of them will sound off in the comments below (and I look forward to it).  He's not particularly well-liked in Congress, but that's partly because putting blame for the current economic mess onto the Fed chair absolves that same Congress (looking at you, Christopher Dodd) from taking any responsibility themselves.  And he's a hold over from the Bush administration, which doesn't earn anyone points in the current climate.

Yet for all his faults, Bernanke seems the safest choice at the moment.  The others under consideration -- Summers, maybe Janet Yellen from the San Fran Fed -- could probably do the same job just as well, but I'm not sure there's conclusive proof that they'd do a better or even substantially different job.  (Well, Summers might be less likely to do the heart-warming "here's my childhood home" tour on "60 Minutes").  Ezra Klein (following E.J. Dionne) had an interesting short rumination today about the fact that preventing a serious crisis doesn't earn as much acclaim as rescuing the country after the crisis did.  This is the story of Ben Bernanke so far.

1. Namely: "1. Paul Krugman's analysis is correct. 2. If you think that Paul Krugman's analysis is incorrect, see rule number 1."  The Efficient Krugman Hypothesis.

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This is Obama's "Heckuva job, Brownie" moment.

Like Obama, he has no understanding of the economy, no vision of what's realistic outside of a political sense and stands for nothing but for the appeasing of the investor class. One would have to be insane to think problems can be fixed without first making accountability (in reality, not in name) the primary issue. If you don't believe in responsibility, then you believe in death.

If people actually knew the cost of not taking our medicine now and doing the right thing, they would jump on it in a heartbeat. Instead, we are continuing on the same track to wreck this country with our only concern being able to feel good while we're doing it. Sweeping problems under the rug only leads to greater disaster down the road. I have no sympathy for a people willing to allow that.
I think I get the gist of what you're saying, though I don't quite follow the specifics, Harry. I don't think Bernanke is more to blame for the financial crisis than most of his contemporaries, and is actually perhaps less involved than most of the people who seemed like possible replacements. He's been more willing to act and loan aggressively at the Fed than Greenspan was (and Greenspan, really, holds as much of the weight on his shoulders, if not more, than Bernanke). And unlike Brown, who was clearly, maddeningly unqualified for the job and then complimented by a president scrambling to deny the truth, I don't see Obama's reappointment of Bernanke as denying what's happening or what's happened. In fact, I expect he'll talk quite a bit about the challenge of the current financial crisis at the appointment announcement tomorrow (9 a.m. EST).

I think Bernanke has a responsibility for how things are now, both good and bad, that isn't discharged by his reappointment. If anything, he'll be more likely to be held accountable if he remains at the Fed -- and has to report regularly to Congress -- than if he wandered now into public life and the rewards of the financial sector.
Sheil Bair, current head of FDIC would have been a better choice....
This proves that the White House and President really have no say in who runs the Fed. It's an appointment that ostensibly comes from the White House, but more likely is decided by foreign Central Bankers -- not Obama.
As Bernanke has stated many times, the "job of the Federal Reserve is to control inflation, and strive for full employment."
We are quickly approaching a 10% unemployment rate, and inflation is just around the corner.
The Fed, and Bernanke are both failures, and we are picking up the tab.
It's funny that you mention Larry Summers, this guy is a complete fraud. He failed as an advisor for Dukakis, he lost $1B while at Harvard, the result of "interest rate swaps," and he has done more damage than good over the years, de-regulating the very industry he is supposedly "supervising" now.
"i dont pretend for a moment to understand everything alan greenspan did for and to our country, but it is my understanding that he led us TO prosperity. i dont think we can blame him for our ensuing collapse, which i see - as you say - as belonging squarely on the shoulders of congress, which failed to control the corporations and allowed us to very sincerely and truly become an oligarchy, with the whole of our government as puppets. i wish i didnt see it this way, but i do."

Jane, Congress merely rubber-stamped Greenspawn's policy. How can you blame them and absolve him? Saying he led us to prosperity but not to the crisis is like saying the same about the 1920's robber barons. of Wall Street. Even he admits he led us to the crisis and that his calculations (housing will never drop all over at once) were fatally flawed.
I dunno, Ron, Sheila Bair has become quite the political infighter in her own right.

I get what you're saying, Jane, and to an extent I agree -- I think a crisis has been averted, but I don't think we're at a point where we can say everything's been solved, it's OK. I think Bernanke has a good chance, having been at the center of this storm, of understanding how to keep things stable. Unemployment is a lagging indicator for recovery, meaning it's the last thing to show improvement even after the economy as a whole begins to pick up, so -- yes, town like yours (and states like mine) will continue to suffer for quite a while. The trick for Bernanke, for Congress, for Treasury going forward will be to make sure that we don't have the jobless recovery we did under Greenspan in the 90s (and I do put a lot of blame onto Greenspan, who oversaw enormous growth without trying at all to cool the economy, which led pretty directly to the massive bubbles that burst and led us to where we are now. Even he has admitted this mistake, in his Congressional testimony).

Cory, I'm very familiar with that Greenwald piece on Summers; I still stand by my own response to it, which is linked above. And I can't get too worried about inflation yet, seeing as though the consumer price index has fallen more than 2 percent in the last year (which is leading to the social security COLA freeze).
If you and Krugman are happy, then I am too.
Nothing wrongwith being an infighter as long as your fighting the right cause for the right reasons...I think Bair has a stronger sense of what the average American needs from the regulators of the financial institutions.....
The Obama/ Bernanke team has led us to a more hopeful economic situation than anyone expected just six months ago, if you look at some of the standards commonly used to measure the health of the economy. I don't understand why Obama is not being given credit for this. It's really a remarkable position we're in, given the dire predictions that we wouldn't come close to turning around for at least a year and a half. As is the usual case, the Democrats don't rally behind a unifying theme the way the Rs do--there needs to be a chorus of kudos for this from all corners of the Democratic party.