Bernie Sanders is not threatening the Federal Reserve's 'independence'
With Bernie Sanders's hold on Ben Bernanke in the news today, it's worth repeating that this does not, in any way, threaten the Fed's "independence." The confirmation process is natural, and if Bernanke were to be defeated, that too would be natural. As Tim Fernholz wrote a couple of weeks ago, "actually making use of the main check that the government has over the Fed -- appointing the chairman -- should be seen as within the normal bounds of Fed-government relations." You may not think that the chairman of the Federal Reserve should be chosen by the president and confirmed by the Congress, but insofar as that's the process, then there's nothing heretical about opposing and even rejecting reappointment.
That, actually, is why I'm sympathetic to Sanders's maneuver. I don't blame Bernanke for the financial crisis, and I think his performance has been basically impressive. There's a fair amount that could have been done differently in retrospect, but in the chaos of the moment, its not clear that anyone else would have performed better. There are more questions going forward, particularly about his sensitivity to inflation, and relative willingness to employ unorthodox measures to boost short-term employment.
But that merits a real conversation, and even something of a fight. We lionize Federal Reserve chairmen for the same reason children believe their father to be the strongest man in the world: Because we need to. Because it makes us feel safer in an uncertain and dangerous world. I'd argue that Alan Greenspan's reputation was, in the final analysis, more dangerous than Alan Greenspan's actions. His comfort with the market enabled the market's comfort with the market. It was a Good Housekeeping Seal of Approval slapped atop an unsustainable bubble. If Greenspan hadn't been so respected, the self-delusion might not have been so strong.
The Federal Reserve needs leadership, not oracles. Bernanke, to his credit, has sought to inhabit the first job more than the second. But part of seeming fallible is being proven fallible. A tough renomination process will be a good opportunity to crack any comfortable consensus, or undue lionization, attaching itself to Bernanke. It doesn't threaten the Federal Reserve's independence, but it's a check against the chairman's deification.
Photo credit: By Brian Snyder/Reuters.