Wall Street and academic economists in recent weeks showed enthusiasm for giving Mr. Bernanke a second term, and some administration insiders felt similarly even though Mr. Bernanke was appointed by -- and served in the White House of -- President George W. Bush. Appointing a Democrat such as Janet Yellen, president of the Federal Reserve Bank of San Francisco, or Alan Blinder, former Fed vice chairman -- both former advisers to President Bill Clinton -- would have been popular with many Democrats. But a move by Mr. Obama to install his own person at the Fed might have have rattled markets and unsettled the foreign investors.
"I think this is a good thing for the markets," said Byron Wien, chief investment strategist at Blackstone Group. "Rather than going through a catechism of what Bernanke's done wrong, let's look at the net result. The economy is improving and the financial system is on the mend. It's a long way from perfect but it's also a long way from where it was a year ago."
Sometime over the last six months I was re-reading the Depression section in Milton Friendman's A Monetary History of the US. There is a chapter called The Great Contraction which details the banking system problems of the 1929-1933 period. Essentially, there were three banking panics over that time period which essentially froze the US economy and led to a huge drop in GDP. This is what Bernanke was trying to avoid with all of his plans. And -- he's been successful as the economy is currently bottoming.
The primary knock against Bernanke is he didn't see the mess coming. This is true. Oddly enough, the only people to see this coming were economic bloggers. There is a general train of thought going around that people who didn't see this mess shouldn't be involved in the clean-up. But frankly, Bernanke's outside the box thinking on how to solve the credit market problem should get solid marks. And the real grade should come in the performance of the credit markets since Bernanke's massive intervention. Interest rates are down. That tells us the risk premium has been priced at a far more normal level which is a damn good thing.
Ben is one of the key players that has helped us to get out of the mess. He deserves a second term.
3 comments:
Bondad,
Let me first say that MLS Soccer, isn't a substitute for you, Wendell and Mr. Venom.
Second, I am a little amazed at the pushback from the Progressive side of the aisle on Bernanke. I've been hearing it all morning, and reading it all morning. What do y'all want Lawrence Summers all of the sudden??
For me, the change started around the 60 Minutes Interview he did back in January/February. I saw where he came from (the South? Who knew), and his background, and got a slightly better glimpse at how the Fed worked. I was surprised, and thus, I was onboard.
What you said about folks wanting no one with the taint of the collapse having anything to do with the recovery is well put. My question is, where does anyone draw that line? I admit some discomfort myself at the notion of folks who cause the downturn helping fix what they broke (especially if they're going to break it again), but at the same time I know its impractical to fire everybody (which is what you'd have to do). Who gets to help and who shouldn't?
of course there is a pushback. bernanke is a mindless, stupid, corporate shill who only wants to enslave the masses for his corporate masters. /snark
There is no good explanation for the Fed's refusal to curb financial sector compensation, particularly bonus compensation practices, that directly contributed to the financial meltdown. Giving the Federal Reserve even more power over our battered economy is simply reinforcing regulatory failure. The consequences will be an even larger collapse down the road.
The Federal Reserve has effectively been captured and controlled by the institutions it is intended to regulate. Geithner was offered a job as Citigroup CEO WHILE SERVING AS THE HEAD OF THE NEW YORK FED.
Obama's entire economic team believes that increasing inequality of incomes and wealth, steadily increasing CEO compensation, and dominance of government by corporations is a healthy state of affairs. This blindness to a runaway corporate sector will lead to economic ruin.
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