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If the Federal Reserve chairman falls in the forest and everyone is around to hear...

There's a lot of annoyance among liberal bloggers (and tweeters) that the White House is making strong statements in support of Ben Bernanke's renomination even as they've been vague on the next steps for health care. I'm similarly annoyed at their abdication on leading the health-care reform conversation, but I'm a bit more sympathetic on Bernanke.

The White House thinks a lot about downside risk. Nationalization might have had the opportunity to be better policy than muddling through, but if it went wrong, everything would blow up. Similarly, there's a good argument for nominating someone more concerned with employment, but if a bad election and some congressional opposition force them to let go of Bernanke and then the markets freak out and the Republicans hold up the new Federal Reserve nominee which further circumscribes the Federal Reserve's ability to act and further unsettles the markets, that could be a seriously bad scene.

This would all be much easier if the White House had decided not to renominate Ben Bernanke months ago. But reversing course amidst a fragile economy at a moment when Republicans are finding their voice (and their votes) against the Obama team's economic agenda? You can see what keeps the White House awake at night.

By Ezra Klein  |  January 25, 2010; 9:08 AM ET
Categories:  Federal Reserve  
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Comments

The Republicans will just use the renomination of Ben Bernanke as an example of "stale thinking" on the part of the Democrats, or status-quo politics, or cronyism trumping serious concern for the economy.

At the end of the day, the Democrats should do what they think is right, rather than trying to evade the political tactics of the Republicans, because they can't win that game. As the Republicans discovered, that's one of the down sides of being the majority party--the minority party doesn't have much to lose, and can spin anything you do--conciliatory or hostile, bi-partisan or not--into a negative.

Posted by: Kevin_Willis | January 25, 2010 9:32 AM | Report abuse

Yah, but what about 'accountability'? The guy - Bernanke - is shouting from roof of the top that it is not Fed which caused the housing bubble and it could not have detected that bubble. As Floyd Norris says, little humility in this regard could have been a long way.

Further, did you see Chief Justice Roberts last week and what James Fallows has to say there? How do we know that exactly at a precise delicate moment, Bernanke will not opt out of any meaning financial reforms? He has been playing those games for a while now - turf war.

Bernanke is past his great work, time to undertake a clean break. If Congress is so worried about puking Market, it could appoint him for a short period (one year only) so that there is a steady hand while a new Fed leader is found who will implement financial reforms (assuming Congress lays down which is a big assumption) without any vested interests as well as past baggage.

Breaking with Bernanke is a clean opportunity to institute 'house cleaning' of Fed and Congress & White House do not want to take that opportunity.

Generally, house does not get cleaned in such cases.

Posted by: umesh409 | January 25, 2010 9:36 AM | Report abuse

And one more thing - I believe Bernanke vote can be as significant as like Iraq war resolution and the Senate voting pattern is emerging quite similar to Iraq war resolution except that John McCain is showing some spine here and John Kerry is exactly at the same spot as he was with Iraq War resolution.

Go figure.

Posted by: umesh409 | January 25, 2010 9:45 AM | Report abuse

It's always about political expediency isn't it? I'd prefer we CHANGE things and start doing things correctly for a change, and that means getting rid of idiots like Bernanke who helped cause the mess we're in.

If American idiots want to vote for Republicans because they can't figure out that someone wants to start getting rid of these thieves, then that means we haven't learned a darned thing in the past 10 years and we're goners anyway.

If we can't even change ONE PERSON in the beauracracy without causing panic, then how in the heck are we going to effect any actual reforms that are major enough to do anything?

I'm sick of these illogical ideas that Progressives can't do anything without offending Republicans. BRING IT ON!!!

Posted by: Lomillialor | January 25, 2010 10:02 AM | Report abuse

Right. And Jim Demint is going to allow progressive candidates for Fed chair to come up for a vote in the Senate.

Imo there are certain things you want to go to the mat for and certain things you don't. Klein, Krugman, etc etc etc have it right in this case.

Posted by: luko | January 25, 2010 11:19 AM | Report abuse

"Nationalization might have had the opportunity to be better policy than muddling through, but if it went wrong, everything would blow up."

Everything could have blown up with not nationalizing (and this was only about some banks not all) too.

It's not at all clear that the blow up risk was worse with nationalizing some of the banks than without.

But in general, it always looked like Obama was very, or overly, scared of looking too liberal, not centrist fairy-land post-partisan enough, and really wanted to play-it-safe in this regard, even if it would really have been safer to be more liberal looking like by pushing hard for a stronger stimulus and using reconciliation to get one if possible as here:

http://richardhserlin.blogspot.com/2009/11/how-to-simultaneously-pass-stimulus.html

Posted by: RichardHSerlin | January 25, 2010 4:05 PM | Report abuse

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