DeLong: Project Syndicate: Obama Has Lucked Out with Bernanke
8/28/09 6:04 PM
Grasping Reality with Both Hands The Semi-Daily Journal of Economist Brad DeLong: A Fair, Balanced, Reality-Based, and More than Two-Handed Look at the World J. Bradford DeLong, Department of Economics, U.C. Berkeley #3880, Berkeley, CA 94720-3880; 925 708 0467; delong@econ.berkeley.edu. Weblog Home Page Weblog Archives Econ 115: 20th Century Economic History Econ 211: Economic History Seminar Economics Should-Reads Political Economy Should-Reads Politics and Elections Should-Reads Hot on Google Blogsearch Hot on Google Brad DeLong's Egregious Moderation August 28, 2009
DeLong: Project Syndicate: Obama Has Lucked Out with Bernanke Obama lucky to have Bernanke -- Shanghai Daily | 上海日报 -- English Window to China New: WILLIAM McChesney Martin, a Democrat, was twice reappointed chairman of the United States Federal Reserve by Republican President Dwight D. Eisenhower. Paul Volcker, a Democrat, was reappointed once by the Reagan administration (but not twice: there are persistent rumors that Reagan's treasury secretary, James Baker, thought Volcker too invested in monetary stability and not in producing strong economies to elect Republicans). Alan Greenspan, a Republican, was reappointed twice by Bill Clinton. And now Barack Obama has announced his intention to renominate Republican appointee Ben Bernanke to the post. The Fed chairmanship is the only position in the US government for which this is so: it is a mark of its unique status as a non or not-very-partisan technocratic position of immense power and freedom of action - nearly a fourth branch of government, as David Wessel's recent book "In Fed We Trust" puts it. The reason American presidents are so willing to reappoint Fed chairmen from the opposite party is closely linked to one of the things a president seeks: The confidence of financial markets that the Fed will pursue non-inflationary policies. If financial markets lose that confidence - if they conclude that the Fed is too much under the president's thumb to wage the good fight against inflation, or if they conclude that the chairman does not wish to control inflation - then the economic news is almost certain to be bad. Capital flight, interest-rate spikes, declining private investment, and a collapse in the value of the dollar - all of these are likely should financial markets lose confidence in a Fed chairman. And if they occur, the chances of success for a president seeking re-election - or for a vice president seeking to succeed him - are very low. By reappointing a Fed chairman chosen by someone else, a http://delong.typepad.com/sdj/2009/08/delong-project-syndicate-obama-has-lucked-out-with-bernanke.html
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DeLong: Project Syndicate: Obama Has Lucked Out with Bernanke
8/28/09 6:04 PM
president can appear to guarantee to financial markets that the Fed is not too much under his thumb. But US presidents seek more than just a credible commitment to financial markets that the Fed chairman will fear and fight inflation. They seek intelligence, honor, and a keen sense of public interest and public welfare. Presidents' futures - their ability to win re-election, to accomplish other policy goals, and to leave a respectable legacy - hinge on the economy's strength. It may or may not be true, especially these days, that what is good for General Motors is good for America and vice versa, but certainly what is good economically for America is good politically for the president. It is here that Obama has lucked out. Ben Bernanke is a very good choice for Fed chairman because he is intelligent, honest, pragmatic and clear-sighted in his vision of the economy. He has already guided the Fed through two very tumultuous years with only one major mistake - the bankruptcy of Lehman Brothers. RECOMMENDED (5.0) by 5 people like you [How?] You might like:
Atlantic Monthly Crashed-and-Burned Watch (Mendacious Judicial Xenophobia from Clive Crook and the Odious Stuart Taylor, Jr. Edition) (this site) Bernanke Reappointed (Matthew Yglesias) 2 more recommended posts Âť Brad DeLong on August 28, 2009 at 07:42 AM in Economics, Economics: Federal Reserve, Obama Administration | Permalink TrackBack TrackBack URL for this entry: http://www.typepad.com/services/trackback/6a00e551f0800388340120a52a8d9d970b Listed below are links to weblogs that reference DeLong: Project Syndicate: Obama Has Lucked Out with Bernanke:
Comments You can follow this conversation by subscribing to the comment feed for this post. "only one major mistake - the bankruptcy of Lehman Brothers." Other than that, Mrs Lincoln ... Posted by: Bloix | August 28, 2009 at 08:26 AM I can't remember who made this comment originally, but a day or so after Bernanke's reappointment was announced, someone said that if Obama made a different choice, and things didn't get better or got worse, it could be traced back to the White House. But if he left Bernanke in place, he wouldn't be assigned much, if any blame, should problems continue. There's probably some truth to that. Besides, he'll have another chance to appoint a Fed Chairman in 2014. To whatever extent my opinion is justified, I think Bernanke has done a good job. But it'd be nice to get someone else in there, especially a Democrat, if for no other reason than to try to stop this idea that the person in that position is infallible. http://delong.typepad.com/sdj/2009/08/delong-project-syndicate-obama-has-lucked-out-with-bernanke.html
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DeLong: Project Syndicate: Obama Has Lucked Out with Bernanke
8/28/09 6:04 PM
other reason than to try to stop this idea that the person in that position is infallible. Posted by: Brian J | August 28, 2009 at 09:14 AM I would like to find one of these jobs where I get (1) lots of power (2) pretty decent amount of money (3) prospect of using the revolving door to get megatons of money 1 year after I leave the job, but most importantly: (4) I never, ever get a performance review, and I never, ever, ever suffer any adverse consequences for making mistakes that cost my employer incredible amounts of treasure (anywhere from $500 billion to $3 trillion in the instant case). Fed Chairman, Wall Street CEO, hedge fund CEO: these guys never pay the price for anything they do and they ALWAYS cash the check. A particularly attractive prospect as I sit here searching the job boards as a victim of the Bernanke/Obama recession. Cranky Posted by: Cranky Observer | August 28, 2009 at 09:23 AM Wasn't it a huge mistake to miss the housing bubble and not increasing interest rates to slow down the rampant speculation and ridiculously low lending standards that mortgage companies used that fueled the bubble? Big mistake in my mind. Posted by: Richard Wang | August 28, 2009 at 09:31 AM Benanke, before this crisis, was entirely in denial of the possibility of the scale of the problem and let valuable and irreplaceable time elapse before action was finally forced upon them. It is not hyperbole to say that the willful ignoring and minimization of the problem is of the same nature and scale of disregard of responsibility that led to 9/11. The term of Bernanke in this crisis has been characterized by an almost complete lack of transparency, a willingness to protect the assets and interests of the most powerful and wealthy with the dollars of the masses, and a determined looking away from standard accounting and regulatory oversight. This again has the same characteristics as the Bush administration was so famous for during that administration. We are only part way into this mess. Celebrating the renomination of a person who brings the same fatal approaches of the previous administration to the new administration is asking, no begging, to fall in similar disatrous traps as the old. Every administrtion inherits the unresolved problems of the previous---but how can you expect a change if you continue along the same paths with the same tactics as the previous? Posted by: Neal | August 28, 2009 at 10:24 AM From the Washington Post (quote) J.P. Morgan Chase, an amalgam of some of Wall Street's most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show. A year after the near-collapse of the financial system last September, the federal response has redefined how Americans get mortgages, student loans and other kinds of credit and has made a national spectacle of executive pay. But no consequence of the crisis alarms top regulators more than having banks that were already too big to fail grow even larger and more interconnected. end quote) Yes, indeed we are lucky to have Mr. Bernanke working on the "too big to fail" front. Posted by: Neal | August 28, 2009 at 11:25 AM Brad means well, but at least know what progressives think of Bernanke. I have to think, "they have a point" even if too far drawn. http://delong.typepad.com/sdj/2009/08/delong-project-syndicate-obama-has-lucked-out-with-bernanke.html
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DeLong: Project Syndicate: Obama Has Lucked Out with Bernanke
8/28/09 6:04 PM
too far drawn. URL is self-explanatory: http://www.alternet.org/workplace/142257/reappointed_fed_chief_ben_bernanke_didn%27t_get_us_out_of_the_economic_crisis%2C_he_helped_cause_it/ Posted by: Neil B ♪ | August 28, 2009 at 01:51 PM OK, so Bernanke's SIX main mistakes were: (1) he completely missed the credit bubble (2) he helped cause the deregulatory crisis (3) he is making the too-big-to-fail banks bigger (4) he is operating in secret and may have spent an order of magnitude more money guaranteeing and bailing out bankers than has yet been disclosed (5) he and Obama are giving "mission accomplished" speeches before it is clear the crisis is over (6) he let Lehman Brothers fail, and he has an almost fa-NATical devotion to Anna Schwarz, no wait, Bernanke's SEVEN main mistakes, er, AMONGST Bernanke's main mistakes were, all right, I'll come in again. Other than that, Mrs. Lincoln . . . Posted by: albrt | August 28, 2009 at 05:29 PM
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DeLong: Project Syndicate: Obama Has Lucked Out with Bernanke
8/28/09 6:04 PM
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