Jonathan Chait

Will Bernanke Be Another Coakley Casualty?

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If I had to guess as I write this, I'd say no. But the trendlines for the Fed chairman aren't moving in the right direction. Today's Wall Street Journal had a piece noting that the Fed chairman was headed toward a closer than expected vote in the Senate next week, with Dems Byron Dorgan and Jeff Merkley joining Bernie Sanders, the Senate's chief Bernanke-hater on the left, as opponents of a second term. (Bernanke effectively needs 60 votes in the Senate.) Then, a little while ago, the paper reported that two more Senate Democrats have come out against his confirmation--Barbara Boxer and Russ Feingold. As the story notes, Bernanke probably still has the votes he needs, since four Republicans voted for him on the Senate Banking Commitee and are likely to stick with him. But he's definitely in uncomfortable territory here.  

Two quick thoughts about this: 1.) I think Bernanke should be confirmed--the Fed clearly screwed up in big ways during the bubble years, but the last two years would have been much, much worse without a Fed chairman as aggressive and unorthodox as Bernanke. (See here and here for my take on this.) On top of which, as Banking Chairman Chris Dodd points out, our still-fragile financial markets would react very, very badly to a no-vote. Bernanke himself, who as I say turned out to be a reassuring presence at the Fed (at least from the perspective of the markets), got off to a pretty shaky start in his first several months on the job. Now is definitely not the time for more shakiness.

2.) Having said that, Bernanke needs to understand the political backdrop for his confirmation vote. As yet, he only seems to kinda, sorta get it. Fortunately for him, it turns out there's something that would give him a lot of bang for his buck politically: Come out strongly in favor of an independent consumer financial protection agency, which the House has already approved and which the White House supports. It seems like a complete no brainer. On the one hand, the Fed, which currently has a lot of authority over consumer protection, appears to have little interest in actually doing the job, if one can judge from the last decade or so. On the other hand, many of the same people who are deeply skeptical of Bernanke and the Fed strongly support an independent consumer agency. Bernanke could, in one fell swoop, get rid of a task the Fed isn't particularly well-suited to doing (a substantive improvement), while also winning points with a lot of critics (a polticial improvement). And yet, for whatever reason, he still seems to be digging in his heels. It makes no sense. Ben, please, for the love of God, let it go! 

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