It seems many in the country believe the answer to our economic woes is to fire every elected as well as appointed official. The public is looking for hides and scapegoats. Let's not compound our problems by making the poor choice to dump the man that is perfectly qualified to continue to lead the Federal Reserve.
I was fortunate to be appointed to serve a two-year term (2008-2009) on a banker's advisory board to the Board of Governors at the U.S. Federal Reserve. As a consequence, I had the opportunity to get to know the governors and get a view into the inner workings of the Fed and got to know Bernanke as a person. Consequently, my impressions may be different than some.
Did the Federal Reserve get everything right over the past decades? No. Although, what organization could? Monetary policy, economic complexities, financial engineering and globalization are not exactly simple topics to manage.
The Federal Reserve did prevent the economy from taking a certain nose dive if they had not stepped in to prop up the financial system. Worldwide confidence in our currency and country would have taken a terrible blow if the Fed had allowed large entities to fail by not intervening. We may not have been able to recover from the terrible blow to the definition of 'full faith and credit' in our government. Even though, some of these entities were clearly not backed or regulated by the Federal Reserve, there was an implied belief in our economic system.
Many of the tough decisions were made over the course of hours, not even days.
Bernanke was absolutely extremely well qualified to be the point person for the Federal Reserve. His knowledge of the Great Depression, prior experience and education background gave him an ideal skill set to venture into extremely complicated and unchartered waters. Bernanke is extremely bright. More importantly, he is extremely conscientious and has a deep commitment to see the country through this financial crisis. Thankfully, this is the case.
The country faced a degree of systemic risk to our financial system we have not seen since the Great Depression. In retrospect, it is clear mistakes were made along the way be repealing Glass-Steagall and other depression era legislation that precluded the type of casino type bets with derivatives that escalated the risks firms were taking. This proved to be a failure of the free market system. I still believe in the free market system as a better alternative to any other type of system. However, it is also clear that we need a systemic regulator in the future able to look across industries and attempt to prevent the big icebergs of the next crisis.
The Federal Reserve is an extremely well run organization attracting many of the best and brightest that choose to serve their country instead of chasing bigger paydays in the private sector. Thankfully, they are willing to do so. This crisis has taught us we need intervention at times as our free market, if left to it own, can be impacted by greed and corrupted.
The Federal Reserve System to be effective must be free from the political process as much as possible. The hundreds of economists and examiners working for the Federal Reserve must remain free from influence and able to work to identify problems and opportunities within banks and the economy.
Bernanke has taken excellent steps to better communicate what the Federal Reserve does and how the organization functions. This education does not happen overnight. He is well respected and the market has confidence in his abilities to continue to see us through this tough economy. He wisely knows the Federal Reserve itself or the administration cannot directly create millions of jobs. It would be great if they could, certainly. He has not tried to create the false impression this is possible. Although, creating the best possible economic environment for recovery and growth without building in too many inflation incentives is not an easy task.
Bernanke, the Federal Reserve deserve more time to work through the tough issues we face as a nation as well as the issues presented on a global basis. Unfortunately, the problems we face were created over decades. No matter how much we want a quick fix solution, it will not happen. No one else will be able to come in and wave a different wand for a faster solution either. Let's get past the politically expedient nature of change, scapegoating and perception over reality.