Will the Senate approve Bernanke’s appointment to a second term? The latest estimates suggest 55 senators committed or leaning toward voting in favor, 23 senators have said they will oppose, and 22 undecided. Senates rules require 60 votes in favor for Bernanke to be appointed to a second term. A vote is likely tomorrow, Friday January 29.
Should he be re-appointed? That certainly is the consensus among economists. (Disclaimer, Ben was chair when Princeton economics and WWS hired me and I know him reasonably well as former colleagues and office neighbors.) I can think of no one better to run the Federal Reserve at this point. One can complain about the Fed’s inadequate supervision of bank lending (not commercial banks, only traditional banks) pre-crisis, both from the perspective of consumer protection and bank exposure. But I dock Ben only a few points for not being ahead of a crisis which so few people even saw the possibility of (this includes all the doomsayers like Roubini who predicted an exchange rate crisis when the dollar gained value and Krugman who foresaw many possible crises but not a banking crisis). What has been amazing is Ben’s rapid and largely (not completely) mistake-free expansion of non-traditional monetary policy on the fly with no precedent to follow. And he understands like almost no one else, the policies in place, the dimensions of the traditional and shadow banking systems, and the dangers and benefits of the unwinding of the policies. Who in the private sector could replace him who is not tainted by their role in the crisis or compromised by conflicts of interest?