The Case for Giving Bernanke Four More Years

Blawgconomics has noted the precarious position of Fed Chairman Ben Bernanke in the past. Recent reports suggest that he is not quite out of hot water yet.

Despite the endorsement of President Obama in the form of a re-nomination as well as some (perhaps tenuous) support from congresssional leadership, Bernanke, being, whether fairly or note, the public face of the recession, is facing an uphill battle on his road to a second term. Notably, unlike past grumbling about Fed nominations, it is not only the Ron Pauls of the world who are debating the pick, but also such high profile pols as John McCain who are joining the fray.

While Bernanke probably has enough support to ultimately gain his re-appointment, and while he is probably too personally identified with an economic meltdown that was not of his making, the dissenting voices could cause some delay in the process. And, interestingly, if Bernanke is not reconfirmed before his term is up, that would lead to Donald Kohn taking the reins. Though this would not really mean any type of shift in internal Fed policy as Kohn often mirrors Bernanke when it comes to interest rate policy, it would signal a further erosion of the persuasive powers of the current President, a phenomenon which was on full display during the recent special election in Massachusetts.

There are many current issues in politics today where the minority should, and does, have a powerful voice. This ensures that the most extreme views are tempered and sometimes leads to compromises which are more broadly beneficial than any one view of a matter. However, in the humble opinion of Blawgconomics, the re-appointment of Bernanke is one particular area the dissenting voices of politics should tread carefully. As the old adage starts, be careful what you wish for. In this case, that means that blocking Bernanke would lead to confusion, uncertainty, and perhaps ultimately, a worse position than we currently find ourselves in.

Ben Bernanke has done a good job in an awful situation. His Fed has reacted quickly and aggressively in trying to keep a financial meltdown in check. Though some measures (particularly those taken on behalf of the Executive) went too far in what is supposed to be a capitalist society, and though current rate policies may be creating a whole new set of problems, Bernanke is still the best man for a thankless job. Not only that, but it is unclear who else would be as qualified as him in the current situation and with so many balls in the air. Of course continuity for the sake of continuity is hardly ever the best strategy, in politics or so many other aspects of life. However, in the absence of another clear-cut, highly qualified candidate, there is something to be said for playing who got us here. Ultimately, the Chairman will likely gain a second term. And, those in power are right to question his past moves, his present strategies, and his future plans. However, in the best case, reality will set in sooner than later and the minority will put its issues aside for the time being in the interest of moving forward on recovery.