Wednesday, February 03, 2010
Ben Shalom Bernanke, Time Magazine's "Person of the Year", was sworn in for another four-year term as Chairman of the Federal Reserve a short time ago in a subdued affair that had none of the pomp and circumstance of four years ago.
Instead of a crowd that included President Bush, one cabinet member, two former Federal Reserve chairmen, and members of Congress, today's ceremony was a staff-only gathering where the only one in attendance not on the Fed payroll was Bernanke's wife Anna and the event barely made the news.
Of course, the lack of fanfare likely has something to do with the fact that the central bank chief remains quite unpopular in the public's eye, many likening his role in the financial crisis to that of Captain Smith of the Titanic who failed to see the iceberg ahead but was largely successful in getting as many passengers into lifeboats as possible.
The critical distinction between Smith and Bernanke was that the 2008-2009 financial lifeboats had a disproportionate number of Wall Street bankers and the Captain did not go down with the ship.
Fed Vice Chairman Donald Kohn administered the oath today in the atrium of the Federal Reserve building in Washington D.C. after which Bernanke delivered another speech in which he stressed the need for both independence and openness for the central bank - a mixture that some see as opposing goals.
The Federal Reserve has been granted, both in law and in political tradition, considerable independence and autonomy. That independence serves important public objectives. Critically, it allows the Federal Open Market Committee to make monetary policy in the longer-term economic interests of the American people, rather than in the service of short-term political imperatives. It also allows the Federal Reserve to make supervisory decisions based on the facts of each case and the need to preserve financial stability, not on the basis of political considerations. In the interest of maintaining public confidence and promoting economic and financial stability, we must continue to protect our independence.If they're so transparent why are they getting sued all the time and, as for independence, surely, in this case, it is overrated - it's hard to imagine how, over the last 20 years, we'd be any worse off today if Congress was running the central bank.
At the same time, in a democratic society like our own, institutional independence brings with it fundamental obligations of transparency, responsiveness, and accountability. The Federal Reserve is already one of the most transparent and accountable central banks in the world, providing voluminous information and explanation concerning all of its activities. However, I believe that we should be prepared to do even more, to become even more transparent. It is essential that the public have the information it needs to understand and be assured of the integrity of all our operations, including all aspects of our balance sheet and our financial controls. We will continue to work with the Congress to ensure maximum transparency of America's central bank, without compromising our ability to conduct policy in the public interest.
How could they have done any worse than the combination of former Fed chairman Alan Greenspan and his protege Ben Bernanke?
Thanks to cheap imports and the neutering of the consumer price index over the years, inflation would never have been a major problem no matter who was setting interest rates and, after years of tough love from Volcker in the 1980s, the nation was primed to create jobs.
Now, about all we can hope for is another asset bubble to come along and make us all feel rich again for a few years before the inevitable bust.