August 25th, 2009
03:53 PM GMT
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LONDON, England – The nomination of Ben Bernanke to a second term as chairman of the U.S. Federal Reserve comes as no surprise. The surprise would have been if U.S. President Barack Obama nominated someone else. The financial markets are satisfied with the job Bernanke is doing. In the middle of a crisis, you don't want to be changing the man responsible for steering the economy back on course.

U.S. President Barack Obama has again nominated Ben Bernanke, left, as chairman of the U.S. Federal Reserve.
U.S. President Barack Obama has again nominated Ben Bernanke, left, as chairman of the U.S. Federal Reserve.

Does it mean that Bernanke has done everything right? No, of course not, he hasn't - and he has admitted that he was mistaken early on in saying that the subprime crisis would be contained. But once he recognized how severe the crisis was, he and the Fed acted with boldness and innovation.

Bernanke also came under criticism for, among other things, allowing the failure of Lehman Brothers. But he defends the decision, saying the failure was unavoidable, that a buyer couldn't be found and that Lehman didn't have enough collateral to meet the criteria for a large Federal Reserve loan to stay afloat.

One area of concern is the massive amounts of liquidity the Fed has pumped into the system and whether those will lead to a re-emergence of inflation further down the road.

Bernanke is acutely aware of those concerns, and today pledged to work to the utmost of his abilities to "help provide a solid foundation for growth and prosperity in an environment of price stability."

His nomination to another four-year term still needs to be approved by the U.S. Senate. He will receive some tough questioning at his confirmation hearings, including why the Fed didn't do a better job of supervising the banks that got us into the subprime mess to begin with. The Fed's exit strategy from its ultra-loose monetary policy will undoubtedly be another area of questioning.

But at the end of the day, Bernanke will be reconfirmed. He has steered the Fed and the U.S. economy through unchartered territory. It's a long way to a full fledged recovery, but at this point, Bernanke deserves the chance to finish the job.

But what do you think – should Bernanke be reappointed? What is your biggest concern regarding the Fed as it goes forward?

soundoff (10 Responses)
  1. Per Holmlund

    The TEAM 2007

    TEAM 2007 keeps its leader. I wonder who is satisfied with 01/2007-10/2008 job. What does the President know that we don’t?

    2000+ Market crises, 2007+, Financial crisis and 20XX Economic… ? But for the time being surf the deficit.

    August 25, 2009 at 5:14 pm |
  2. Mr H

    Well, Bernanke was in charge when the crisis was being 'funded' and allowed to spiral out towards this climate of uncertainity.

    Bringing in another 'third party' at this occasion would delay the healing process and perhaps may not even provide a way out of this mess.

    Bernanke is close to these issues like a newborn to mum and as such it'd be best to retain his experience and knowledge around the Fed business.

    Besides those who blame him on this crisis should have no issues him fixing it either.

    August 26, 2009 at 1:51 am |
  3. Terrence Deagle

    This is incredible. According to a CNN poll, 73% of the people approve of the job this guy is doing. The government is predicting a 9 trillion (ah what the hell-let's call it a 10 trillion dollar deficit) over the next decade (heh, heh). We've never seen anything like this before and the unemployment numbers are all manipulated. Don't believe a word these people say.

    The U.S. government is creating dystopia. In other words, they are intent on making the lives of the populace so miserable that I can't believe there won't be a second American Revolution in the United States. It's as if the government is playing with monopoly money and they are acting like greedy little bullies and having a big laugh looting the treasury. An analogy can be drawn with modern times to the fall of the Roman Empire.

    August 26, 2009 at 2:39 am |
  4. Ray Orosa

    Obviously Bernanke was not the author of the asset bubble. That falls squarely on Greenspan, but Bernanke was part of the Federal Reserve System that ignored all the warning signs over the years and he continued those policies to the bitter end with disastrous consequences to the US economy and the world. The question is if the old model of growth and development is a dead model we have not heard Bernanke articulate what it is that will be new. The problems continue and there are, despite the "green shoots" of supposed recovery, serious policy issues have been left unanswered and generalities that he will ensure that inflation from all the money poured into the economy will not rear its ugly head sounds more like a vain hope. What is clear is that the Fed really cannot control the direction of the economy through interest rate manipulation and that the longer term effects of the use of such a policy create more problems than it is worth and the actions taken by the Fed have gone well beyond the boundaries of Fed traditions if not prudence what with the unprecedented creation of money to "save" some institutions at the expense of the public. Economic growth and monetary growth have to be harmonized, meaning the latter must not be allowed to grow at a rate that exceeds the real growth of the economy; derivatives cannot be allowed to grow without a sound foundation and insurance rules revised so that the issuance of credit default swaps are treated like an insurance policy and subjected to prudential rules; more serious controls must be put on financial institutions like banks who violated Basle rules on leverage with impunity through the creation of special purpose companies. The trouble, of course, is that there seems to be no one else on the horizon with fresh perspectives or a new economic model for sound economic growth. Too many "Greenspanites" exist in too many Central Banks who are unwilling to make politically unpopular decisions to keep the economies of the world in sound shape. If he is confirmed let us all hope that there has been some kind of economic paradigm shift in the Fed or the next several years are going to be very problematical as the contrarians who predicted the burst of the housing bubble predict today.

    August 26, 2009 at 3:41 am |
  5. Nils Levsen

    @ Ray Orosa: Very insightful comment!

    August 26, 2009 at 6:25 am |
  6. Mike Williamson

    Perfect! The guy that didn't see it coming and then grossly under-estimated the effect is just the right man to steer us out. It looks like the transfer of money from poor to super-rich continues! Three chairs for Ben (Harvard, Princeton and Yale probably).

    What in God's name will it take for Obama to see that this man is a fool. This is a disgrace and a disaster.

    Here's Hoover in 1930...

    August 26, 2009 at 7:36 am |
  7. Albert

    Congratulation, from wedgefield, south carolina. a yellow dog dem.

    August 26, 2009 at 11:33 am |
  8. Tony Cutler

    What a load of ... bull poo! Ben will see the end of the American financial system and economy.

    August 26, 2009 at 1:34 pm |
  9. Shan Saeed

    Ben appointment is a very significant and politically savvy decision under these economic conditions. As we navigate through turbulent times, US economy needs someone who has integrity, solid reputation, strategic thinker, ability to steer the economy out of recession, insight about various issues confronting an economy and above all well respected globally in the financial markets.
    I was fortunate enough to study with Ben's classmate at MIT, Prof John Huizinga at Uni. of Chicago from where I graduated this year. He spoke very highly about Ben Bernanke ability to analyze things from different perspective and to make strong judgment call under arduous financial conditions we are in....

    I fully support this decision. I would call this decision Bold and very strategic in nature that will send signal to the market. He has the ability to take the economy on the right track going forward....

    Shan Saeed
    Uni of Chicago, Booth School of Business
    MBA 2009 Graduated
    With Honor Roll

    August 28, 2009 at 3:26 am |
  10. want a real alternative

    other than a socialst model of economy?

    good luck.

    September 2, 2009 at 3:11 pm |

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