Friday, January 22, 2010
A number of prominent Democrats have signaled that they will not support Fed Chairman Ben Bernanke's re-nomination to the Fed. They say they want to purge the government of anyone who had a role in the banking crisis. My guess this upsurge in anti-Bernanke sentiment may be more a reaction to the upset victory by Republican Senator Scott Brown in Massachusetts than the qualifications of Mr. Bernanke. The stunning loss of the "Kennedy Seat" and the apparent derailing of the government's health-care takeover, has left many in the Democratic party searching for a new mantra. That mantra appears to be congealing into "We inherited these problems with evil bankers from George W. Bush, and anyone associated with the Bush Administration must go." That argument would seem to be a little dog-eared after twelve months. However, because Ben Bernanke was appointed by George W. Bush and was on the job in the early months of the banking crisis, he now has cross hairs on his back. The thought that politics would remove Mr. Bernanke from his critical position at the Fed is chilling. Economists from both sides of the aisle have extolled Mr. Bernanke's leadership of the Fed during these most difficult times. Indeed, the financial markets would not take kindly to the forced retirement of Chairman Bernanke. If those people who are now opposing Bernanke were to triumph over their own President's endorsement, in my judgment political and economic chaos would reign. I believe a significant part of the recent tailspin in the markets is due to worries that there may be a Bernanke revolt underway. Let's hope that less political, cooler heads prevail, or we may find ourselves in the middle of another financial crisis.