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Saturday, January 23, 2010

More on Bernanke

by Calculated Risk on 1/23/2010 12:52:00 PM

From Jim Hamilton at Econbrowser: Why Bernanke should be reconfirmed

I asked a senior Fed staff economist in 2008 how Bernanke was holding up personally under all the pressure. He used an expression I hadn't heard before, but seems very apt. He said he was extremely impressed by Bernanke's "intellectual stamina," by which he meant a tireless energy to continually re-evaluate, receive new input, assess the consequences of what has happened so far, and decide what to do next. That is an extremely rare quality. Most of us can be very defensive about the decisions we've made, and our emotional tie to those can prevent us from objectively processing new information. On the recent occasions I've seen Bernanke personally, that's certainly what I observed as well. Even with all he's been through, the man retains a remarkable openness to hear what others may have to say.

Please permit me to suggest that intellectual stamina is the most important quality we need in the Federal Reserve Chair right now.
From Brad DeLong: Don't Block Ben!
I think Bernanke is one of the best in the world for this job--I cannot think of anyone clearly better.
From Paul Krugman: The Bernanke Conundrum
As I see it, the two things that worry me about Bernanke stem from the same cause: to a greater degree than I had hoped, he has been assimilated by the banking Borg. In 2005, respectable central bankers dismissed worries about a housing bubble, ignoring the evidence; in the winter of 2009-2010, respectable central bankers are worried about nonexistent inflation rather than actually existing unemployment. And Bernanke, alas, has become too much of a respectable central banker.

That said, however, what is the alternative? Calculated Risk says we can do better. But can we, really?

It’s not that hard to think of people who have the intellectual chops for the job of Fed chair but aren’t fully part of the Borg. But it’s very hard to think of people with those qualities who have any chance of actually being confirmed, or of carrying the FOMC with them even if named as chairman (which is one reason why this suggestion is crazy). Does it make sense to deny Bernanke reappointment simply in order to appoint someone who would follow the same policies?

And yet, the Fed really needs to be shaken out of its complacency.

As I said, I’m agonizing.
Krugman suggests we need someone with the "intellectual chops for the job", but who hasn't been assimilated by the "banking Borg" - and someone who would also be effective in leading the FOMC. I agree that Bernanke meets the first and last qualifications. And I think he is a far better Fed Chairman than Greenspan.

However I'd also prefer someone who expressed concerns about the asset bubbles fairly early on. Perhaps it is premature to name a specific person, but I think San Francisco Fed President Janet Yellen comes close to meeting all of the criteria.