PrintAugust 25, 2009
Manchild President Stays with Adult as Fed Chair
Without claiming to know what the ultimate history of Ben Bernanke's leadership as Chairman of the Federal Reserve will be, one thing is clear: Barack Obama has turned to the Bush Administration for what might be his most important appointment. How deliciously ironic. Certainly Fed Chair has long been considered an apolitical and independent office, but nothing in Obama's America is apolitical and precious little remains independent.
So with that in mind, Bernanke's appointment has a couple of immediate political ramifications. First, Obama has decided that Fed Chair is not one of those positions that he can tinker with by putting in one of his "structural feminists" or "black separatists" buddies from college or church or community organizing. When you consider that the entire Obama message and method has been that any of his radical friend liberals know more about "fixin' the economy" than anyone from across the aisle, the Bernanke re-appointment is a stunning admission on his part that perhaps we should let the adults make some decisions.
It's fine to let a wacko like admitted Communist Radical (his words) Van Jones be the Czar of Green Jobs. No problem with putting a "wise Latina woman" on the Supreme Court. But when it comes to money, having a few Republicans around is not such a bad thing. (not to say that Bernanke is the consumate conservative Republican, but more on that later).
And the second big point is this: Bernanke's pick might be a calculated choice to allow Obama cover to not yet "own" this economy. You know, the Bush boys messed it up so let them clean it up. Under questioning from veteran investment guru Art Cashin this morning, Obama apologist John Harwood of NBC admitted as much.
So what about Bernanke's performance and legacy? Surely, the Fed Chairman has been involved and in some case spearheaded more government intervention into the markets than free marketeers would like. For that, many conservatives are wary of Bernanke and some, like Ron Paul, are apoplectic. These are legitimate concerns. Particularly concerning were comments he made related to the GM bail-out, though that issue was not under his control to change with Obama, Pelosi and Reid in power.
Also, Bernanke's history does not start with his ascension to the Chair. Perhaps more than any position in government, Fed Chair's do not operate in an historical vaccum. He really did inherit a system that was "bubbled up" as a result of many things, including but not limited to Alan Greenspan's 16 year easy money reign, a mortgage system greatly infected by government interference for decades, complicated derivative investments owned by many but understood by few, and an America that had quit producing energy but had not quit using it.
He also was appointed by a President with squishy conservative economic beliefs at best, and had to make some of his hardest decisions while the standard bearer of the Republican Party was a candidate with even worse credentials. It is true that the Fed Chair is apolitical, but it is also true that a Fed Chair being fiercely independent at a nervous time in financial history could have caused an even greater meltdown of market wealth. At some point, calming the markets while presenting a unified front with the President and the Secretary of the Treasury is perhaps more important than actually enacting the best policies. Markets are creatures of "animal spirits" as much as financial facts after all, and fear is the greatest animal spirit of all.
Further, Bernanke knows all about the anti free market legislation coming out of Congress and these laws do also impact the economy. Adam Smith as Fed Chair might not have the freedom to be as laisez faire as he would like were he Fed Chair today. All of which makes the final grade that Bernanke will achieve something that only history will decide. That will also be a more accurate picture of his free market beliefs -- or lack thereof.
But in the meantime, I think one thing is clear. Obama is way over his head with regard to esoteric financial issues, and he is actually trusting George Bush's judgement on who should be Fed Chair more than what would normally be his instinctive choice. Now that's funny, and I don't care who you are.
