With one week left in Fed Chairman Ben Bernanke’s first term, a sense of unease rattled the stock markets yesterday as several Democratic Senators (Boxer & Feingold) announced that they would not support President Obamas nomination of Chairman Bernanke for a second term. I wrote “A Second Term for Ben” (see below) in late August and shortly thereafter the president nominated him for a second term. I stand by my original position: Chairman Bernanke has earned a second term. We would be better served without the revisionist history that is taking place in Congress and with a forward look to the ongoing recovery from the Great Recession.
A Second Term for Ben
In my last posting, “Goldman Sachs’ Swagger,” I received more feedback than usual and it was more mixed than usual, but I stand by my position that while the company’s over performance has resulted in some arrogant behavior, the firm and its partners are not evil. One of the people I heard from was the famous journalist and columnist, Robert X. Cringely. Bob and I were colleagues long ago in the early ’90s at InfoWorld, where he wrote the well-read “Notes from the Field” column. We have remained friends over the years, but we have always seemed to come at things from a slightly different vantage point. My last blog inspired him to write “Is Technology Evil?” (www.cringely.com) He clearly did not like my sports analogies and found wisdom and inspiration in the Google motto, “Don’t be Evil.”
Now I am not ready for a steady diet of point counterpoint with Cringe, but our exchange lead me to the question: Should President Obama appoint Fed Chairman Ben Bernanke to a second term when his current term ends on January 31, 2010? I am confident that Cringe and I will arrive at very different conclusions.
Alan Greenspan’s long tenure as Chairman of the Board of Governors of the United States Federal Reserve began when President Reagan appointed him in August of 1987. He was appointed to successive 4-year terms by President George H.W. Bush, President Bill Clinton and President George W. Bush until he retired on January 31st, 2006 and Ben Bernanke was appointed to succeed him. Today, historians are re-evaluating Greenspan’s tenure, particularly in light of the sub-prime crisis that shook the foundations of the financial systems around the globe. Prior to this, though, he was heralded for maintaining stability and continuity in the global markets and for keeping down inflationary pressures. (We should never forget the inflation of the Carter years.) When faced with the option of reappointing a Republican appointee or replacing him, President Clinton twice decided that the country was better with Greenspan at the helm. During this period, the country experienced unprecedented growth and actually ran large surpluses.
President Obama is faced with a similar choice: should he reappoint Ben Bernanke or go to his own bench for Larry Summers? Chairman Bernanke has studied and written extensively about the causes of the Great Depression and understands that one of the underlying causes was the lack of credit. When he saw the credit markets freeze after Lehman Brothers filed for bankruptcy, he immediately worked to pull us back from the abyss with then Treasury Secretary Paulson and Tim Geithner, who was then head of the New York Federal Reserve and is the current Treasury Secretary. I sense that as confidence is slowly restored in our financial institutions globally, we would be best served, as would President Obama’s own interests, by his reappointment of Ben Bernanke to a second term.
Cringe, your turn at bat.
On a very long flight west last evening, I started Pat Conroy’s latest novel, South of Broad, which takes place as all of his novels do in Charleston, that charming, historic, southern city. This is his first novel since Beach Music, which was published over 14 years ago. I am finding it to be a very special way to end August, with Leo King narrating and bringing us back to the South Carolina coast.