Bernanke's future - and the Fed's

This man and the institution he currently represents have an incalculable impact on developments in the markets and, in an indirect way, on the economic crisis as a whole. So what lies beyond the end of his term in office?

Ben Bernanke, the chairman of the US central bank, the Federal Reserve, has played a central role in the global financial crisis...

...Mr Bernanke's four-year term as Fed chairman comes up for renewal in January, and his reappointment is now the subject of an increasingly bitter debate between right and left.

His role in the bail-out has come under fire from conservative Republicans and left wing Democrats, who believe that he betrayed his Republican roots by providing so much state support for the banks while ordinary citizens have suffered from the economic downturn.

Other economic conservatives fear that the huge Fed lending - along with a Federal government deficit that is expected to reach $1.7 trillion this year, is likely to prove highly inflationary, and are urging the Fed to unwind its big lending programme as soon as possible.

And some influential voices argue that, since the Fed performed poorly regulating the banks before the crisis, it should not be given the lead role now.

"Its credibility has been tarnished by the easy credit policies it pursued and the lax regulatory oversight..and the heavy influence that the banks have on the Fed's governance," say two former heads of the Securities and Exchange Commission, William Donaldson and Arthur Levitt...

...But Mr Bernanke has also attracted wide support among mainstream economists and investors for his handling of the crisis.

A petition from more than 250 prominent economists, including Yale's Robert Schiller and three Nobel Prize winners (Robert Merton, Eric Maskin, and Daniel McFadden) argues that the criticisms are putting the independence of the Fed at risk.

"When the Fed judges it's time to begin tightening monetary conditions, it must be allowed to do so without interference," they said.

And Mr Bernanke so far has one very important backer - President Barack Obama, the man who will decide later this year whether to reappoint him.

"He is doing a fine job in difficult circumstances," Mr Obama said at a press conference in June.

...The debate over Mr Bernanke's future, however, is also a debate about the future course of US economic policy after a year of unprecedented government intervention amid the deepest economic downturn since World War II.

Source

There are so many issues at stake here. Will the Fed end up losing or gaining influence, for example?

The article concludes Bernanke is likely to stay. If so, how controversial do you think that would be - when the time comes?

He will end up staying and expect to hear the words go something like, "He was the chairman when the economy collapsed and he is best equipped to handle the situation to further get us out of the recession because even though we are starting to see signs of recovery we are not out of the woods yet. This is just the first step in building an economy that does not depend upon boom and bust cycles, but instead is geared for continuous growth." Or something like that.

Crooks flock together you know, I love how economist argue that we should have no say on our monetary policy. That is classic.

Good find Pause!

[edit on 13-8-2009 by Hastobemoretolife]

My guess is he goes...believe it or not he is not in favor with the Obama administration...with a guy like Rahm whispering in Obama's ear, expect a war between Wall St and the administration when it becomes clear they plan on a replacement...The wild card is that the market may take a sudden and drastic turn for the worse before his tenure expires...

Prediction : History will show that Bernanke was successfully able to walk a very tight rope after the crash of 2008 for a time, but his methods both prolonged the length of The Greatest Depression and also attenuated the horrific carnage of its severity. His name will be forever associated with the repeal of the Federal Reserve Act

[edit on 13-8-2009 by RolandBrichter]

reply to post by pause4thought


Did you hear what Obama said today? Didn't I call it or what?

Okay enough ego stroking of myself, Obama might not be open and transparent as far as business at the White House goes, but his tactics are open and transparent about what he is trying to do to distract attention for the negative news surrounding him.

We have a bunch of school yard amateurs at the White House, that crap might work in Chicago, but not on the country.

Hey Pause,

Bernanke will stay. There will be another downturn in the economy and it will be a "W" shaped recovery. Ha ha I got that from an economic website I follow. I'm not that smart especially when it comes to monetary policy.

But I think he'll stay, unless he decides to leave himself which is, of course, possible. That's what they'll tell the public anyway.

But the banks need Bernanke to continue their own recovery *sarcasm mine*

Glad to see you back too, Pause. I got your comment on my profile. It looks just like me!! 40 years from now anyway hee hee.