Federal Reserve chairman Ben Bernanke is finished. Whether or not you blame Bernanke for the current economic crisis doesn't even really matter. The fact is that with Senators Barbara Boxer and Russ Feingold coming out against renominating Bernanke for a fresh term, Bernanke could, at best, stumble over the finish line, and probably won't. He'll have to withdraw. The sooner he does, the better.
Already the upheaval and uncertainty has the markets tumbling. But there's an obvious fix for Obama: nominate 82-year-old Paul Volcker to run the Fed again. It's time for the seasoned old guy who rescued the American economy in the 1980s to pull off a second act. Already Obama is signing off on Volcker's prudent recommendations to limit banks from engaging in dicey activities such as owning hedge funds, while taxpayers shoulder the risk. Now he should entrust Volcker with stewardship over the economy.
Volcker is a modest man. A few years ago I saw him at a conference at the Four Seasons hotel in Washington, DC and told him, "You're the guy who saved the economy." He shrugged his shoulders, laughed, and said, "If you say so." But lurking underneath his amiable exterior is a shrewd and decisive leader who crushed double-digit inflation in the early 1980s, a feat that set up the economy for several decades of growth.
In short, Volcker has credibility. No one is better positioned to crack down on Wall Street excesses and push through genuine deficit reduction than Volcker. Maybe Bernanke, who will continue to serve on the Fed's Board of Governors until 2020, can watch Volcker and learn from him. By that time, he may be ready to run the Fed himself again. But for now, it's over. The only question is who Obama will decide to appoint in his stead. It should be an easy decision.