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.