Good Idea Update
President Obama has announced that he will name Ben Bernanke to a second term as chair of the Federal Reserve. This would seem to avoid the media frenzy of “will he?” / “won’t he?” http://www.nytimes.com/2009/08/26/business/economy/26fed.html?hp
I have just finished reading David Wessel’s In Fed We Trust. Bernanke is impressively cool and clear-headed during the high moments of the crisis last year at this time. Not perfect, mind you, but the man for the job. Paulson is reported in the book to be as frantic and loose-minded as he appeared to be on TV. Wessel is well worth the read raising all the issues of conflict of interest that are lightly touched upon in most news stories.
UPDATE: Chris Eggeimeir posted a caveat about Bernake in the comments below. The caveator he cited, Simon Johnson, has a post at the NYTimes. Reasonable questions are raised about whether Bernake can free himself from the powers and ideas that led to the current Great Recession. But as with the earlier discussion, Johnson does not propose an alternative to Bernake. Is that because there is no real alternative?
http://economix.blogs.nytimes.com/2009/08/27/bernanke-and-other-firefighters/?hp
Is the role too powerful, too important for it not to be an elected post?
The post is intentionally designed to be shielded from political pressure. That is why it is not a Cabinet position, and its term does not coincide with Presidential elections. What makes for shrewd politics is not always what is best for the economy.
Wessel has a brief history: the idea originally was for the Fed to act as a central banker not a political actor (as if central bankers aren’t political, but….). The Chairman of the Fed has become more important in recent decades than was intended in the original legislation. I shudder at the idea of a national election for a fed chair and even more shudder at Congress selecting one, though the Sendate has to confirm. I’m really not sure that is so much anti-democratic as common sense.
This is a disastrous idea. Simon Johnson (former IMF chief economist and current MIT professor) over at baselinescenario.com offers insightful analysis on Bernake and why he is getting another shot, and it doesn’t have anything to do with his demeanor.
Well worth a read: http://baselinescenario.com/2009/08/25/which-bernanke-whose-bubble/
Until Obama becomes serious about regulatiing the financial industry, I’m afraid we are in for another big crash. Bernakes reappoinment simply confirms which oligarchy is in charge: Wall Street.
I thought the appointment was reasonable, given all that happened. Beyond the unsurprsing partisan takes on this, the real question will be what happens when inflation of some magnbitude occurs.
CE: Johnson’s analysis is insightful. But he doesn’t come to the conclusion you offer: “disastrous idea.”
Who are the alternatives to Bernake?
Jim, I take your point. But it seems as if the position is shielded from accountability as well as from politics. Is this a good thing, or is it a tyranny?
Hi, Todd, conceptually, it seems somewhat similar to the situation for a federal judge, another position that is intentionally designed to be shielded from the shifting winds and passions of politics – except that judges are appointed for life, whereas a Fed chairman’s run is capped at 14 years. In both cases, the holder of the position is nominated by the President and confirmed by the Senate, so there is a type of political accountability on the front end. Also, the Federal Reserve chairman must report periodically to Congress, although he doesn’t have to do what Congress tells him to do.
In the case of federal judges, there is also provision for impeachment. Whether there is something analogous for the chairman of the Federal Reserve, I don’t know.
Yes, Johnson is an academic so he isn’t as prone to hyberbole as me. But he is not at all positive about more bubbles being blown and their aftermath. For confirmation of his negative view of Bernake (unless he implements some financial regulations) check his chat in the washington post:
http://www.washingtonpost.com/wpdyn/content/discussion/2009/08/25/DI2009082501197.html
As for others capable of doing the job, anyone who recognizes that Wall Street needs to be reigned in would do. Volker, Joe Stiglitz, Janet Yellen, and Roubini come to mind.
Well, your fed chair proposals seem possibilities in view of their qualifications, but…. Volker has served already and is in his 80s, not that that’s disqualifying, but seems unlikely. Roubini hardly seems likely to get confirmed. Stiglitz and Yellen would have to fight their way past Larry Summers. As I look at the president’s decision, I can’t help think that his primary reason was he didn’t want to change horses in the middle of the recesion, and secondarily he didn’t want to face a fight with Summers and/or dismantle his WH economics staff.
Simon Johnsonnot not only not prone to hyperbole but willing and able to think about the balancing act that this decision requires….
CE: Of your four names, who do you think should have been chosen?