The number of reasons for President Obama to reappoint Ben Bernanke as Fed chairman greatly outnumber the reasons for letting him go and putting someone like Larry Summers in his place.
Bernanke is viewed as the hero of the great recession, the only man who bridged the two administrations in a time when the credit and financial markets were failing. Secretaries Paulson and Geithner may get high grades for their work in saving the banks and making money available to the capital markets, but at best they can only split any accolades
Bernanke was on deck for the entire storm. But, it is easy to forget that he took his job on February 1, 2006 which means that he was serving as Fed chief as the clouds were forming. He did little or nothing during 2006 and early 2007 to anticipate or hold off the disaster.
Critics of Bernanke say that he turned the Fed into a political animal, a lapdog of the Bush and Obama Administrations. He spent too much time working hand-in-hand with the Treasury department, undermining his agency’s multi-decade independence. Critics are also concerned that his interest rate and monetary policies will lead to sharp inflation beginning next year.
The reappointment of Bernanke can be simply viewed as an expedient political decision by an Administration that faces questions about a sharply rising deficit, a potentially ineffective stimulus package, and a costly overhaul of the health care system. Announcing a second term for Bernanke will be popular with the Wall St. community and the population at large, a population which perceive the fed chair as the most important actor in the still-fragile economic recovery.
Bernanke may be the beneficiary of timing, the timing of a president who is in trouble and needs good news. Bernanke may not even want to keep his job. He can make $100,000 a stop on the speaker’s circuit. He can leave while he is ahead. He won’t, either out of a sense of duty or because he wants to remain in the limelight instead of becoming an irrelevant old man like Alan Greenspan, circling the globe, promoting a new book.
Whatever the reason, Bernanke will be around next year and the next and will risk his repuation if the economy hits the skids again.
Douglas A. McIntyre
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