Bernanke Has Earned A Second Term
Today we learned that the Obama administration is going to re-nominate Ben Bernanke to head the Federal Reserve. This is a very positive development because Bernanke has demonstrated that he is more than capable at the job. There are several reasons why he should be given a second term.
First, a bit of history is in order. One of the primary reasons for the Great Depression was the banking crisis of 1929-1933. Over these years, there were three banking crisis which essentially froze the country leading to a mammoth contraction in GDP. This Great Contraction (as labeled by Milton Friendman) was a primary reason for the Great Depression.
This lesson was not lost on Bernanke. As a graduate student he studied the Great Depression. In fact, his collection titled "Essays on the Great Depression" is available for purchase. If you were going to write a fictitious resume for a central banker to deal with the situation it would probably read a great deal like Bernanke's. In short, he is literally a near perfect match.
Now consider this video from Representative Paul Kanjorski:
On September 15 of last year, the US was literally hours away from a financial meltdown. Had this happened, the entire financial system would have fallen apart. The economic ramifications would have been a disaster - as in we would be in the middle of another depression.
This is the primary reason why the Troubled Asset Relief Program (TARP) was rushed through so quickly. Regardless of the ways the economy got to that point - and there were a number of major contributing factors - curing them at that time would not have been prudent. Think of it this way. If someone gets drunk and drives their car into a pole, lecturing them about alcoholism in the emergency room is not a good idea. At that time, the goal is to keep them alive. And that's exactly what the Federal Reserve proposed and did.
But that's not all. Bernanke and the Fed came up with a number of programs to ease the credit crisis and promote liquidity. Most of these names are familiar by now. But the point is that short-term interest rates as measured by the A2/P2 spread are now back to far more normal levels.
In addition, a changing of the guard right now would not be a good idea, especially with the economy in a very fragile place. The markets have learned to trust Bernanke; getting traders used to another Federal Reserve head would not be in our best interest.
The primary knock against Bernanke is that he didn't see the crisis coming. This is true. In fact, the only people who really got the call right were bloggers. However, once the problem became apparent Bernanke thought outside of the box and worked as quickly as possible to deal with the problem. Simply put, he did a good job.
I was originally wary of Bernanke. I was also critical at times. However, the proof is in the pudding. The economy is bottoming and a recovery (albeit a weak one) is in sight. This is not the time to change partners - especially considering Bernanke was instrumental in preventing a complete financial meltdown. He should be appointed for another term.
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There are more people so sure of their own opinion under a Hale "Bonddad" column than any other writer at huff Post! It is amazing!
I guess we are not so much fantasy fans as reality-based! Bonddad's posts are ones only one of the 10% of us who take home 50% of the nation's wages can love.
A steady drumbeat of hacks have lined up to repeat the same talking points and drown out criticism of the Federal Reserve. It doesn't matter if they are true. If they are repeated often enough some people will be fooled. Stewart is showing his true colors. Another apologist for the thieves who are destroying our country.
seconded
"The primary knock against Bernanke is that he didn't see the crisis coming."
Maybe if you rewrite history and ignore everything that happened prior to him becoming chairman. Those of us not suffering from amnesia remember his actual record. He was on the board of governors from 2002 to 2005. He was one of the cheerleaders for the policies that created the crisis. He didn't just not see it coming he helped to create the crisis.
Bonddad,
We who are about to be homeless salute you!
We'll see change when the millions already homeless march on Washington and set up tent cities in the park, just like under Hoover.
I hope you are right. I expect, just like under Hoover, Obama will order the tents set on fire and the homeless driven out at gunpoint. Should do wonders for our international public relations!
redding888. Your information is very revealing. The question remains. Did the Administration's massive bailout all over the world make our country any more solvent or secure? I argue that the winners were our economic competitors in Europe and Asia and we are the losers with the loss of our economic system. Fundamental losses are just that and can not be covered over with monitized chicanery. I would appreciate your assessment of my assessment.
Olephart, you stated elegantly and cobently what I attempted to say.
I have read that the Fed or the Treasury is redeeming the banks' toxic trash for the Euro Zone. Basically like with China forcing the Government to take over Freddie and Fannie to make their paper good we're making the Europeans whole at taxpayer expense so the banks can stay in business, not post losses and pay their billions in bonuses. Is this a great country or what!
I could care less who's running it.
Audit it, then END IT!!
I am so sick of hearing about this supposed pending financial meltdown excuse for bailing out and lining the pockets of the well connected.
If this point has any merit at all the treasury could have sent everyone a check for five grand with better effect. Instead we send trillions to a bunch of crooks.
Embarrassingly poor article, at minimum make a good list of positives and negatives.
It's kind of like when you take a airline flight, you want it nice and boring, which means that you continue living. You are primarily paying the pilot to forsee and avoid problems in the first place, his value is also desirable when there are unforseen problems, like the pilot who ditched in the Hudson.
Bernacke got one out of two, if he's the cream of the crop, that's a little scary.
"On September 15 of last year, the US was literally hours away from a financial meltdown. Had this happened, the entire financial system would have fallen apart. The economic ramifications would have been a disaster - as in we would be in the middle of another depression."
Yes, Hale, THAT'S THE POINT. That's exactly what should have been allowed to happen. Would it have been pleasant? Nope. Is there a law somewhere that says life always has to be pleasant? NOPE. You're just postponing the inevitable, and you know it....
No- Bernanke has earned a jail term.
He handed out trillions of dollars without the approval or oversight of one elected US official, with no transparency and the American people have not got one damn thing to show for it. No the very banksters and speculators are cashing in huge bonuses with what essentially is our money and using it to buy members of Congress to kill EFCA, Health Reform, stricter environmental regulations and all the rest.
I would have preferred to watch the whole thing crash and burn with the FDIC taking over CitiBank and all the rest.
I hope everyone smoked a cigarette after all this transpired because we got screwed.
Greenspan and Bernanke served their masters well. The people of the US are not their masters. That is the problem. Why not a government system of credit? The constitution is just a piece of paper to bankers.
There are very serious problems with the Fed. How is such a cozy arraignment constitutional? Talk about special privileges and immunities!
The captain on the Titanic was probably re-appointed also.
Secrecy and special privilege works for Wall Street but not Main Street. Even former lawyers forget that the constitution is the backbone of our system, not some Wall Street types that use insider information for special profits.
The Founding Fathers fought a revolution against the Oligarchy with their East India Company and Bank of England. Now the Oligarchy is sitting on Wall Street. Same group with special privileges. Totally undemocratic.
I am sorry, I won't bother posting to this commenter's spiel any longer. It must make you wonder at how wonderful you are! You are wrong continuously, and yet you jingo like Cramer. Does it not bother you that you are wrong so persistently? You seem to forget, this stooge was appointed by the same jerk that allowed the giveaway of our country. He doesn't watch the fed, he is looting it for his friends, of which you must be one to think he is doing a good job. You talk about how he saved things by losing our treasury almost overnight.
Are you sir, stressed? Perhaps, deprived of oxygen? Or is it just an insane requirement to be right about everything, even if only in your mind?
With all respect to Paul Krugman, this is the more prudent take on this administration's actions on the economic file. Yes, the financial market could use some attention, but trying to rebuild both the medical and financial infrastructures at the same time during the first nine months of a new administration is clearly a case of a bridge too far. Particularly unwise would be rebuilding the financial system in a hurry from a standing start, without anything like a mandate to do so. Thus, instituting Krugman's preferred financial reforms would come at the cost of institution Krugman's preferred healthcare reforms. Politics is the art of the possible.
If the president had tried to take all of Krugman's advice, his administration would already be on the rocks.
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