Reappointing Bernanke: The Bad, The Good

It looks like the President will reappoint Ben Bernanke to the chairmanship of the Federal Reserve. (One story here.)

If it were up to me, I would not have reappointed Chairman Bernanke. Reasons:

• he went overboard in his fear that we'd have another great depression on his watch
• contributed to the sense of panic
• participated in the inconsistent policy that aggravated the problem (after having neglected the vagueness of "too big to fail" before the crisis)
• and overstepped his constitutional and legal authority (albeit with the encouragement of two administrations).

Here's what's good about his reappointment: he is now (or at least, once the Senate confirms him) free to tighten monetary policy when he and his Fed colleagues see fit. This would have been decidedly awkward if in December Bernanke decided that it was time to start snugging monetary policy, but the White House had not yet announced a decision. The chairman's term as chair ends January 31. I'm not sure exactly when the Fed should start tightening; I think it's too early now, but sometime early next year will probably be the right time. When that time comes, the Fed will need to act promptly and decisively. I'm worried that Dr. Bernanke will be too cautious, too fearful of a recession. That would throw us right back into the cyclical 70s.

Comments

[Dave Wrixon:]

Struth! I actually agree with most of that.

Aug 25 03:32 AM

[manya05:]

Excerpt (abstract) of AP/Yahoo News with the rumor about Obama re-appointing Bernake:

"President Barack Obama plans to reappoint Ben Bernanke to a second term as chairman of the Federal Reserve, a position from which he guided the economy away from its worst recession since the 1930s and, the White House hopes, toward an economic recovery critical to its legacy."

let's look at the key words here "...White House hopes..." at this point the US economy is running on green shoots thinking (and lots of cash printed out of thin air by Helicopter Ben)

Aug 25 09:13 AM

[Bill L.:]

Honestly, it doesn't matter who runs the fed. The fed has a poor history in terms or their charter. They are always late to loosen, and they are always late to tighten. It comes down to this, many were extended credit that in a poor economy can not pay it back. That debt is hidden in chopped up bonds and derivatives. Until that debt is found and priced accordingly (zero) the problem persists regardless of the feds actions.

Aug 25 10:36 AM

[James Quinn:]

Bernanke is a tool of Wall Street.

theburningplatform.com...

Aug 25 10:59 AM

[Fighting Yoda:]

"free to tighten monetary policy " - highly unlikely - Fed has made long term commitemnets MBSs worth $650B. Fed is just running a Bubble/Ponzi scheme - only way it can continue is by simply continuing it.

Aug 25 12:29 PM

[Whippet:]

The best news about the announcement- Leisure Suit Larry is still sitting on his fat a$$ outside the Tax Cheat's office.

Bernanke is a good fit- at least he is relatively predictable in his easy money policies. We now have no doubts that another wave of liquidity will come crashing into the dunes after this ebb tide...

Aug 25 02:14 PM

[Old Trader:]

As Whippet points out, "better the devil you know". At least the market seemed to think so today.

Aug 25 10:46 PM

[User 472251:]

Bernanke is popularly know to be a tool of Wall Street.


You can learn more about reappointing issues by going to GetThemOnline.

Aug 26 04:49 AM