Bernanke’s Reconfirmation is a Bit of a Red Herring

I have to dissent a little bit from my friend Ed. Opposing Bernanke at this point is almost costless for everyone involved. If he is not reconfirmed as chairman he will still remain a member of the Board because his position as chairman is separate from his position as a member of the Board.

Secondly, the Fed’s vice chairman, Don Kohn, is highly respected and been with the organization forever. He will simply take over the formal duties as chairman once Bernanke is no longer chairman.

Third, the Fed, by its nature, tends to operate by consensus. So it doesn’t really matter very much, insofar as monetary policy is concerned, whether Ben is chairman or merely a member of the Board. Remember also that the policymaking arm of the Fed is the FOMC, which includes a number of regional bank presidents.

Fourth, there is no obvious replacement for Bernanke who could get confirmed any more easily than him. Talk about Paul Krugman or someone more dovish on monetary policy is a pipe-dream and I’m pretty sure Paul has enough sense not to accept the position even if it is offered–just as Milton Friedman rejected Reagan’s offer for him to replace Volcker in 1982.

Finally, Ben’s strength is as an economist and analyst. Whether he is chairman or not, his perspective will be respected by the other Board members. Moreover, it’s not unprecedented for a chairman to continue to serve well after he term as chairman expires. Marriner Eccles was not reappointed as chairman but remained on the Board for some years.

In conclusion, the issue of Bernanke’s reconfirmation as chairman is a bit of a red herring. I don’t anticipate any meaningful change in policy at least in the near term. If it turns out that this is just the opening shot in a war between Congress and the Fed, that’s another matter.

Note: James Hamilton has similar thoughts here.

About Bruce Bartlett 76 Articles

Affiliation: Forbes

Bruce Bartlett is a columnist for Forbes.com, the online side of Forbes, the nation’s premier financial magazine.

He served for many years in prominent governmental positions including executive director of the Joint Economic Committee of Congress, Deputy Assistant Secretary for economic policy at the U.S. Treasury Department during the George H.W. Bush Administration, and as a senior policy analyst in the White House for Ronald Reagan.

Bruce is the author of seven books, including the New York Times best-selling Impostor: How George W. Bankrupted America and Betrayed the Reagan Legacy, and thousands of articles in national publications including the Wall Street Journal, New York Times, Washington Post, New Republic, Fortune and many others. He appears frequently on CNN, CNBC, C-SPAN and Fox News, and has been a guest on both the Daily Show with Jon Stewart and the Colbert Report.

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1 Comment on Bernanke’s Reconfirmation is a Bit of a Red Herring

  1. This is just another opening shot between Congress and the Fed.

    Romer (loathesome): OUT
    Geithner: OUT (and hanged for his economic crimes)
    Summers (the Harvard looter): OUT
    Bernanke: OUT

    Isn’t it obvious that people think the Federal Government is a RICO? How out of touch are you, you corrupt clown?

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