James Pethokoukis

Politics and policy from inside Washington

The Bernanke Dilemma

December 3, 2009

BB’s effort to be the charming professor has failed. Only a  fifth of the public supports his renomination. It’s now almost gospel in the GOP (at least outside DC) that the Fed should be abolished. And Democrats are picking their spots for attacks, such as Dodd’s idea for a single regulator and Frank’s idea to neuter the regional bank presidents.

Certainly more transparency is needed. Among other things, Federal Open Market Committee minutes could be released days after a meeting rather than weeks. Like Jean-Claude Trichet, his European Central Bank counterpart, Bernanke could even hold press conferences right after FOMC meetings.Bernanke should also consider backing off the idea that the Fed should be the U.S.’s systemic risk über-regulator. He might win the case on the Fed’s credentials, but accumulating power while resisting accountability is a political loser. For Bernanke, a bit less authority might mean a lot more support in Washington and on Main Street.

If not, then expect a continued push for an audit bill along with other efforts to increase congressional influence.

Comments

Here is Ron Paul and Jim DeMint in the WSJ:”The Fed has also, for the past three decades, been required to engage in monetary policy with the goal of maintaining stable prices and full employment. Since the natural trend over time is for prices to decrease, a mandate to maintain stable prices is a mandate to pursue an expansionary monetary policy and inflate the money supply to counteract the lower prices we would expect from increased productivity.”http://online.wsj.com/arti cle/SB1000142405274870478230457454228097 1009044.htmlCentral banking is inherently unstable and supremely complex. It fails for the same reason as central planning failed in the Soviet Union. Abolish it and bring back free-market capitalism.

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