Ben Bernanke has been nominated by the President for a second term as Fed chairman. Congratulations Ben! You earned it having provided the most accommodating monetary policy for the administration since oh Alan Greenspan. Since you were a governor at Greenspan's Fed, your reward from the Bush administration was being given the chairmanship. So accommodating is nothing new for you. Some have written that Larry Summers was a candidate for the job but the president did not want to give the impression of appointing a lap dog that would compromise the Fed's independence. As if the Fed's independence can be compromised more! However, I understand that the Fed can be intoxicating and that the chairmanship can be downright addictive. Reserach shows that the Fed is usually most accommodating when a chairman seeks to be reappointed by a new president. However, thereafter the Fed regains its stones. Anyway, if Larry Summers had been appointed, the president is smart enough to know that the Fed chairman has only one vote on the Open Market Committee. An appointment of an outsider would cause friction enough. An appointment of an obvious flunky might cause an outright rebellion. One thing to note is that some talking heads are contending that the policies of this president are intended to destroy the country. I for one find this hard to believe because it would lead to the defeat at the polls of his supporters in congress - and nothing is more important to our elected officials in Washington than re-election. Indeed, if the president wanted to wound the country, he would have not re-appointed Bernanke. That would have lead to a sharp decline in the stock market. The market would realize that all bets were off. The Fed would be in crisis. There would be never ending relenting monetary ease, higher rates of inflation and more monetarization of the national debt. So the president had his chance to spur a severe economic downturn and spurned it. So congratulations Ben. You sucked up to the president and got renominated. Hopefully after your confirmation by the Senate, you will regain your integrity and assert Fed independence. I can only hope.
Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com