James Pethokoukis

Politics and policy from inside Washington

Obama to renominate Bernanke as Federal Reserve chairman: a few thoughts

August 25, 2009

And once more, another person in Washington involved with helping create the financial crisis gets to keep his job. In a bit of a  summertime surprise,  President Obama has renominated Ben Bernanke as Fed chairman.

1) So not only does the White House release its new budget forecast on the same day as the Congressional Budget Office releases its forecast so there aren’t two separate days of terrible stories, it also drops this bomb to further dilute the impact. The news might even generate a nice stock market reaction Smart politics.

2) I am mildly surprised. Although, Bernanke seemed to have the backing of Wall Street, the politics were not as clear. What president would not rather have his own pick in the post? And while most economists praise the Fed’s efforts to keep the recession from becoming a depression, politicians in both parties have attacked the Fed’s big bailouts, as well as its handling of the BofA-Merrill merger. Plus, Bernanke terribly underestimated the potential severity of the financial crisis in its early days. If Obama wanted to make a switch, there was enough there to justify it.

3) Bernanke got lucky with the timing. If his term was up in January of 2011 instead, he might get more of the blame for a lackluster economic rebound. As it is, he gets credit for engineering the rebound — and given the mood six months ago, any rebound is a good rebound. But another year of high unemployment might alter those views.

4) I think Obama should get credit for not picking an obvious dove like Janet Yellen, but I am not sure she was really a ever a viable option. I think Larry Summers was viewed as both too independent and too outspoken, a real wildcard. Bernanke is a known quantity in the position who has worked with the White House every step of this crisis.

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