I didn't want to be right about this (video from 12/17/2009):
From Market Talk:
...It seems hard to believe that Congress would not approve the President’s choice for the Federal Reserve, but the uncertainty of it is hanging in the air, after the confirmation vote was delayed to next week. Some time next week. The Fed chairman’s term expires Sunday.
Let’s just say it wouldn’t exactly send the right message to the rest of the world, and the bond market especially, should Congress vote Bernanke out. You have to expect a good amount of this is just posturing, something Congress does better than any other group on the planet. But, you know, wars tend to start with a single, errant shot.
The latest spanner in the works came from Nevada’s Harry Reid, who said he’s still undecided about how to vote. Reid happens to be the Senate’s Democratic leader, so his voice carries some amount of water. The odds are still that he gets reappointed — a senior Senate Republican aide said it’s not an issue as at least four GOPers intend to vote for him — but even the fact that it’s being discussed just a week before his term ends should give you some indication of just how unsettled things are these days....
What a great time to give financial markets a big dose of uncertainty along with the potential shock of replacing the Fed chair.
Update: What happens if he is not reappointed before his term ends on 1/31/2010?:
The chairman and vice chairman of the FOMC are chosen separately from the main Board of Governors. At the first meeting of the year, the committee members vote for the two positions. The chairman of the Board is usually named chairman of the committee and the president of the New York Fed is traditionally the vice chairman. At next week’s meeting, the FOMC is expected to vote for Bernanke and William Dudley of the New York Fed to take those positions for 2010. Though Bernanke’s term as chairman of the Fed’s Board is up on Jan. 31, he retains his position as Fed governor and remains on the FOMC. As long as he stays on the Board of Governors, he can lead the rate-setting committee.
But things won’t be as stable at the Board of Governors. When Bernanke’s term expires on Jan. 31, Vice Chairman Donald Kohn is set to become acting chairman. Kohn remains in that position until Bernanke or another nominee is confirmed.
Update: Brad DeLong:
Don't Block Ben!, by Brad DeLong: I wish Boxer and Feingold had not done this:
Patrick Yoest and Luca di Leo: Boxer, Feingold Come Out Against Fed Chairman Bernanke - WSJ.com: Ben Bernanke faced ebbing support for a second term as Federal Reserve chairman as more senators adopted a populist, antibank stance even as the White House launched a public push to defend his candidacy. The erosion of support crossed party lines. Two Democratic senators facing re-election in November, Barbara Boxer of California and Russ Feingold of Wisconsin, on Friday joined two Democrats and an independent who previously announced their opposition. Ten Republicans say they, too, will oppose Mr. Bernanke.
Alarmed that there might not be the 60 votes in the Senate needed to extend Mr. Bernanke's term beyond its Jan. 31 expiration, the White House entered the fray publicly for the first time, with officials trying to win support among Democratic senators...
First, a correction to the story: it's not 60 votes, it's 51--for there are many more people who want to be on record as opposing Bernanke than who actually want the Federal Reserve to be headless on February 1.
Second, I think Boxer and Feingold have fallen into a trap. If Bernanke's nomination fails, it will be because of a combination of left Democrats and right Republicans. Why would right Republicans vote against the nomination of a Republican-appointed hard-money Republican? So that they can then vote against financial regulatory reform without taking political damage. "You are too friendly to the banks!" their opponents will say. And they will respond: "Oh yeah? Your president wanted bank-friendly Ben Bernanke to stay at the head of the Fed. AND WE BLOCKED HIM!!"
Boxer and Feingold, it seems to me, are enabling the future Republican ability to block financial reform without taking political damage from it.
So I find myself thinking about last August, and the Bernanke renomination:
Bernanke's Reappointment: David Wessel
Obama to Reappoint Fed Chairman Ben Bernanke - WSJ.com: President Barack Obama will announce Tuesday that he is nominating Ben Bernanke for a second four-year term as chairman of the Federal Reserve, White House Chief of Staff Rahm Emanuel said...
I think Bernanke is one of the best in the world for this job--I cannot think of anyone clearly better. He has made only one big mistake--buckling under to pressure from all those yelling at him for enabling moral hazard and not finding a way to takeover Lehman Brothers, and he is not going to make the same mistake again...
I am surprised that he is being reappointed. I would have thought that the combination of people angry because he has given too much public money to the banks and people angry because he didn't stop the recession would together make him damaged and that Obama would want to bring in a fresh face--never mind that Bernanke had no way to try to lessen the recession save by policy steps that inevitably involve giving money to the banks. It shows, I think, a seriousness about getting the policies right--or as close to right as we can--that I like to see in a president...
Update: See also Why Bernanke should be reconfirmed, by Jim Hamilton.
Update: Support from a staunch libertarian.