BLOG VIEW: Will Bernanke Keep His Job?

ecently read an essay by Mark A. Calabria, the director of financial regulation studies at the Cato Institute in Washington, D.C., [/b]where he predicted that Federal Reserve Chairman Ben Bernanke will be out of work when his term expires in January 2010. Calabria's argument was that Bernanke has ‘few supporters on Capitol Hill’ and that Bernanke, a George W. Bush appointee, has effectively absorbed the criticism for the corporate mega-bailout that may have otherwise dented President Obama's standing in Washington and across the country. In trying to determine whether Calabria's thesis is correct, I find myself finding too many pros and cons to adequately come to my opinion. Will Bernanke be re-appointed for another Fed term? My answer is this: I don't know, because there are great arguments for and against having him on another go-round. Yes, Bernanke is a Bush administration appointee, but the old cliche reminds us that politics has a way of making very strange bedfellows. Alan Greenspan's reign as the Fed chair began with an appointment by Ronald Reagan and re-appointments by George H.W. Bush, Bill Clinton and George W. Bush – and that is no mean feat, since Greenspan had relatively little common ground with any of the four presidents' very different political dogmas. In any event, President Obama does not seem allergic to keeping Bush administration people on the job, as witnessed by his decision to retain Robert Gates as the secretary of defense. Admittedly, Bernanke was slow in recognizing the looming economic crisis that brought about our current recession. But then again, there were very few Jeremiahs on Capitol Hill warning against the coming doom. If everyone in Washington were held accountable for allowing the recession to take root, we'd have nothing but empty seats in both chambers of commerce and vacant offices in all of the regulatory agencies. But when push came to shove, Bernanke was front and center with then-Treasury Secretary Henry Paulson to offer a rescue strategy. In retrospect, it may not have been the most efficient course of action – but the alternative of doing nothing didn't seem too feasible. In the second half of 2008, when there was a conspicuous leadership void on both sides of Pennsylvania Avenue – a do-nothing Congress and a president with record-low approval ratings – Bernanke and Paulson stepped in and steered the economy away from total obliteration. The Calabria essay did raise a cogent point about the recent House Oversight Committee hearing on Bernanke's role in Bank of America's purchase of Merrill Lynch. Yes, that was bad PR for Bernanke. However, I imagine that won't be a fatal blow to the Fed chairman. However, 2010 is an election year, and the Democrats will be banking on showing they are able to correct the economic malaise, which, for better or worse, has been attached to the Bush administration and the Republican-controlled Congress that ran the country for most of the Bush years. If signs of recovery are absent by late fall, then Bernanke could easily be jettisoned along the lines of ‘Hey, we tried him, but he didn't work out.’ So what is going to happen? Your guess is as good as mine. And what is your guess? Drop me a line via e-mail or leave your comments here – either way, I am curious to know how the industry reads Bernanke's performance and whether there will be an encore. – Phil Hall, editor, [b][i]Secondary Marketing Executive[/i][/b]. [i] (Please address all comments regarding this opinion column to


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