Thursday, January 28, 2010

Bernanke in

Despite his flaws, Ben Bernanke was still the best available choice for Federal Reserve chairman. There is nobody on the planet more qualified than Ben Bernanke for the job (something even Paul Krugman admitted), and after a slow start in 2007, the Federal Reserve and the FDIC were the *only* two government agencies to do exactly what their charter said they were supposed to do when faced with a massive banking crisis in 2008-2009. Without the massive quantitative easing done by the Fed in the aftermath of the collapse of the housing market, we would have entered into a deflationary spiral that would not have stopped until we were reduced to bartering for turnips in the streets.

The Senate voted 70-30 to confirm Bernanke, the most bipartisan vote that the Senate has managed in quite some time, if not exactly the overwhelming endorsement that previous Fed chiefs received. I do not yet have a breakdown of how many Democrats vs. Republicans voted for Bernanke, but I would not be surprised if it were a handful of the most radical of both parties who voted against him. The problem is, there just wasn't a good choice to replace him. Sure, Obama could have nominated Paul Krugman to be the next Fed Chairman, but c'mon -- a) Paul would never accept the nomination because he's worked in government before and it was a nightmare for him because he had to keep his mouth shut, and b) the Senate would have never voted to confirm him. And that applies to pretty much anybody else who had the chops to replace Bernanke, they either didn't want the job, or they would have never been confirmed.

So anyhow, now that's off the table for the next six years, meaning we get sensible monetary policy anyhow if not as loose as I'd like to see it (I'd like to see the Fed move aggressively on Treasuries in order to create a scarcity of Treasuries that would force investors to move their money into more productive areas such as lending to businesses, but the Fed's Treasury purchase program has been fairly limited thus far). Hopefully without the need to get confirmed, Bernanke can be more aggressive than he had to be this past six months when he had to shore up political support amongst the economic cretins who are the U.S. Senate.

-- Badtux the Monetary Penguin


  1. Breakdown I heard is that the "no" votes were from incumbents with tough re-election campaigns coming soon. They won't have to defend a yes vote, and the confirmation was secure.


  2. barcalounger28/1/10 6:01 PM

    Joseph Stiglitz said he would serve if the President nominated him. But he probably couldn't get the votes either. That's two Nobel laureates we passed on.

  3. Don't get me wrong, I adore Joseph Siglitz, but I don't think he's the right sort to be a central banker. A central banker by definition has to be somewhat of a monetarist -- that's the whole point of a central bank, to control the money supply -- and Bernanke is, while Stiglitz isn't.

    In any event, it doesn't matter. President Hoover II would never nominate a man who insists that the primary job of our financial institutions is to increase the health and welfare of the average working man and woman. President Hoover II believes that following Republican economic strategies, with their end goal of making the rich richer and the rest of us not, is the proper thing to do. Not only would the Senate never confirm Stiglitz, President Hoover II would have never nominated Stiglitz in our wildest dreams. So the issue, I suspect, is moot -- Bernanke is what was achievable, and Bernanke is what we got.

    - Badtux the Monetary Penguin

  4. What happened to your criticism of "Helicopter Bernanke?"

  5. RCC, I've never been much of a Bernanke critic insofar as his actions at the Fed are concerned. He is a classic Milton Friedman-style monetarist, which is exactly what you want in charge of the Fed. He's said some stupid things to Congress and so forth, but you get the Fed chairman you got, not the perfect one you'd like -- who would neither get nominated nor confirmed, alas.

    - Badtux the Monetary Penguin


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