Which Bernanke are we getting for the next four years--the financial hero, or the oblivious professor who will allow another crisis to bloom? And why were we told so far in advance of the January deadline? Those are two big questions being debated in the wake of Obama's earlier-than-expected announcement this morning (which we covered here).
For a range of views on the Fed chief's reappointment, we examined the responses of dozens of top econopundits and highlighted the best answers. What are the main camps?
- Shows Prudence says Joe Wiesanthal, editor of Business Insider: "By making this pick, Obama's shown that he knows when to pull back a bit, and not put one of his team (most likely it would've been Larry Summers, who would've gone over terribly) in the slot. That's really why it's a good pick."
- Calms Worries says Felix Salmon at Reuters. "It's a sign of the severity of the financial crisis that Barack Obama is re-nominating Ben Bernanke as Fed chief now, in August, despite the fact that his term doesn't end for another five months. It's one of the few sources of potential uncertainty which the White House can address and resolve unambiguously, and it's good that it's happening."
- Reward for Radical Decisions said Nouriel Roubini of RGE Monitor on July 25. "Bernanke deserves to be reappointed. Both the conventional and unconventional decisions made by this scholar of the Great Depression prevented the Great Recession of 2008-2009 from turning into the Great Depression 2.0....Bernanke deserves to be reappointed so that he can manage the Fed's exit from its most radical economic intervention since its creation in 1913"
- A Worthy Colleague says Greg Mankiw, Harvard economist in his personal blog. "He has led the Federal Reserve System with humility, intelligence, wisdom, and grace. ...I extend my congratulations to the President for a fine decision and my condolences to Ben for having the spend the next four years overworked and underpaid."
- Forgivable Mistakes says Bob McTeer at this personal blog. McTeer argues that the Fed didn't create the housing bubble, and that it uniquely failed to predict the collapse. "Nobody with the authority to do something about it saw [the crisis] coming. Not the Fed; not the SEC; not the banking regulators (OCC, FDIC or OTS); not Congress. In fact, Congress kept giving Fannie and Freddie quotas to meet to expand home ownership among low income people."
- Wall Street Victory says Bob O'Brien at Barron's. "From the perspective of Wall Street, where the outlook for housing and jobs - the issues of greatest concern on Main Street - is probably subordinate to the direction of interest rates."
- Keeps Fed Continuity says Noam Scheiber at the New Republic. "It just takes a while for financial markets to understand a particular Fed chairman's idiosyncracies and ways of communicating (and, conversely, for a new Fed chairman to settle on the most efficient way of communicating with markets).
- Bernanke Is Power Hungry said John Tamny, editor of RealClearMarkets in a strongly-worded post at Forbes this past July. "Bernanke's past and present lust for the job of Fed Chairman signals an expansive vision about what the position entails, and this means he's unfit for the role, which should have greatly diminished prestige."
- Abolish the Fed argues Michael Shedlock at Mish Global Economic Trend Analysis. "Bernanke should not be reappointed. Indeed the proper thing to do is abolish the Fed entirely."
- Solved None of the Problems insists John Hussman at Hussman Funds. "Solving economic problems, to our Fed Chairman, is as easy as throwing money out of helicopters....Most likely, we will face the same credit issues a few quarters from now, given that the lull in the adjustable-rate reset schedule is near its end."
- Transferred Wealth to Those Who Failed says Arnold Kling at EconLog. "If you bail out leveraged firms that made bad bets, then you take a loss. If you take a loss, then what you mostly did was transfer money from ordinary taxpayers to the managers and shareholders of unsound banks. And then you pat yourself on the back, claiming that you averted another Great Depression."
- Too Much Opacity says Dean Baker co-director of the Center for Economic Policy Research in the American Prospect. "Bernanke has refused to make any information public about who has received loans under the various spending lending facilities created by the Fed over the last two years, or under what terms."
- Merely Prolonging the Crisis says Rolfe Winkler at Reuters. "His supporters say he averted a second Great Depression. I disagree. He's merely delayed it. The liabilities of the financial and consumer sectors haven't gone away, they've merely been absorbed by the public balance sheet."
- Wrong Man Going Forward suggests Ryan Avent at the Economist. "If the future involves a quick repeat of crisis conditions, such as those with which Mr Bernanke is now intensely familiar, then that would suggest he didn't do a very good job in the first place and shouldn't have been reappointed."
- Time to Clean Up the Mess, says Andrew Leonard at Salon. "Unwinding the vast expansion of the Fed's balance sheet and figuring out how to tighten the screws on the money supply without plunging the country into an another economic contraction will be a tremendous challenge. Why saddle that grief on some up-and-coming Democratic economist?"
- Not the Best Forecasting Skills demurs Bill McBride at Calculated Risk. "I'd prefer someone with better forecasting skills...I think he is a solid choice for a 2nd term (not my first choice, but solid)."
- A Mostly Political Choice says Douglas McIntyre at Daily Finance. "The most important reason for The White House decision is that the size of the deficit and the financial risks of the health care reform package have caused the public to question the Administration's financial plans. Bernanke is a popular figure both on and off Wall Street...In Washington, all decisions are political."
- The Real Challenge Begins says Phillip Coggan at the Economist. "Although Mr Bernanke's first term was incredibly challenging, his second term will be even more so. Having used an unprecedented combination of policies to try to rescue the economy, he now has to withdraw that stimulus at some stage."
- Another Crash, Another Rescue predicts Simon Johnson at the Baseline Scenario. "When the Big Crash comes, there'll be another moment of decision: "Collapse or Rescue." And we know what Bernanke #1 will do [is rescue]. Which is, of course, why this administration is reappointing him - and not seriously reregulating big finance."
- Odd Timing muses Ezra Klein at the Washington Post. "It's a rare person who reappoints the Fed chairman in order to relax...It's about stepping on the mid-session budget review, which will project a $1.5 trillion deficit in 2009 and $9 trillion in deficit financing over the next decade."