Thursday, August 20, 2009

Who's behind the anti-Bernanke stories?

Like this one in the New York Times:
In Washington and on Wall Street, it would be a surprise if President Obama did not nominate Mr. Bernanke for a second term, even though he is a Republican and was appointed by President George W. Bush.
But the White House has remained silent. And despite Mr. Bernanke’s credibility in financial circles, both he and the Fed as an institution have come under political fire from lawmakers in both parties over the handling of particular bailouts and the scope of the Fed’s power. . . .
While the White House keeps mum about Mr. Bernanke’s future, the leading Democratic candidates to replace him include Lawrence H. Summers, director of the National Economic Council; Janet L. Yellen, president of the Federal Reserve Bank of San Francisco; Alan S. Blinder, a Princeton economist and former Fed vice chairman; and Roger Ferguson, another former Fed vice chairman. . . .
You can read the whole thing, but what arouses my curiosity is why the editors of the New York Times felt the need to run this story at this time.

Stories like this don't "just happen" in Washington. Somebody covets the guy's job, either for themselves or one of their allies. The fact that Larry Summers' name is at the top of the list of candidates to replace Bernanke might make Summers the chief suspect.

On the other hand, Summers has enemies in the White House, and the idea may be to kill two birds with one stone: Get Bernanke out of the Fed, and replace him with Summers so as to remove Summers from the Economic Council.

So I suspect Treasury Secretary Timothy Geithner (or his friends) of pushing the anti-Bernanke meme to the press. Geithner obviously views Summers and Bernanke as rivals to his influence in the Obama administration's economic policy shop.

Oh, and all the praise for Bernanke in the Times story? Overdone and premature. When you cut the rate to zero, it's easy to look like a genius -- for a while. But what happens when the next wave of foreclosures and bank failures hits? You can't cut the rate lower. At some point, you reach the limits of monetarianism, and we've been at the limit for months now.


  1. You can't cut the rate lower. At some point, you reach the limits of monetarianism, and we've been at the limit for months now.

    No, but you can push a stimulus bill through Congress and simply give money to your buddies. Monetarism is only limited when coupled with sanity.

  2. I keep telling you: look into Geithner, former President of the Federal Reserve Bank of New York, the most powerful and corrupt of the Federal Reserve districts. Look at the number of people who left the Fed NY and went to Goldman Sachs, for example.

  3. Take a look at the semi-recent article written by Amity Shlaes regarding "dethroning" Bernanke which got coverage on Bloomberg. Last time I checked Shlaes was a fellow in economic history for the CFR.

  4. before Gore kneelThu Aug 20, 05:51:00 PM

    hmmm. None of the above.
    d) Joseph Stiglitz, Columbia University