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Bernanke's Reappointment


Interesting post on the Economics of Contempt blog about Bernanke's performance as Fed chairman and whether he should be reappointed (it's almost a done deal but not quite - an angry senate has wrecked havoc on many a foregone nomination before). E. of C. seems to think that even though Bernanke did OK over all, the things he did well, pretty much any other Fed chief would've done in the same way and his bad decisions were, well, really bad. Let's analyze these two arguments.
His first point is that the Fed was always going to take unorthodox measures once it became clear we were headed towards a Great Depression redux, no matter who was at the helm. I sort of agree with that but I would point out that Bernanke literally wrote the book on how to deal appropriately with a replay of the Great Depression. Any other Fed chief would have, in effect, followed the Bernanke playbook and, given the choice, I'd rather have the playbook's author himself running things than anyone else.
His second point is that two of Bernanke's decisions really stunk and are unforgivable in retrospect. One is his 75 basis point interest cut after Société Générale's star rogue trader Jérôme Kerviel did his deed. It was a wasteful, uncalled for waste of what could've been precious bullets later on. The other is his non-cut the Tuesday after Lehman's collapse. I agree that those were indeed bad decisions but we mostly know that because of 20-20 hindsight. If we were to compute the number of crucial decisions Bernanke had to make, then add to that the decisions he didn't make or even think to make, we would find out that bad decisions were statistically inevitable.
So all in all I do agree with Economics of Contempt's reservations but I'm not sure they are sufficient to remove Ben Bernanke from his Fed perch. Something else entirely worries me though and that is the fact that the job of Fed chairman going forward will likely be very different from what it has been over the past few years. Ben Bernanke, having been pretty much the ideal person to avoid another Great Depression, might not be the best person to steer this economy back toward decent growth while avoiding all the potential traps.

Disclosure: No position