[UPDATED 1/28/10: SEE BELOW]
When President Obama reappointed Federal Reserve Chairman Ben Bernanke in August (who was a Princeton economics professor and department chair before his 2005 appointment), his second term seemed almost assured and his Senate confirmation appeared to be smooth sailing–until, of course, this month.
Public anger over bank bailouts and bonuses has made Senators nervous, and Bernanke has been on the receiving end of the resulting political backlash. With Bernanke’s Senate vote suddenly put in doubt, the market has plummeted in recent days in the face of uncertainty.
Princeton professor and New York Times columnist Paul Krugman has weighed in on the issue this week: he supports Bernanke’s reappointment…barely.
Where do I stand? I deeply admire Mr. Bernanke, both as an economist and for his response to the financial crisis. (Full disclosure: before going to the Fed he headed Princeton’s economics department, and hired me for my current position there.) Yet his critics have a strong case. In the end, I favor his reappointment, but only because rejecting him could make the Fed’s policies worse, not better.
Bernanke, according to Krugman, has been too complacent on financial reform and unemployment, and too prone to seeing the world “through bankers’ eyes.”
According to the Wall Street Journal and Foreign Policy magazine, several names have been thrown around as possible Bernanke replacements, with Princeton professor (and Press Club alumnus) Alan Blinder ’67 as a top contender. Krugman, too, mentions Blinder (who was Vice Chair of the Fed during the Clinton administration) as a good candidate for Bernanke’s job.
Still, Krugman offers his lukewarm support for Bernanke because he believes appointing someone else would create unneeded political turmoil. Krugman says the country would also risk getting someone who lacks the influence and sway to prevent the other members of the Fed (who, he says, are worse) from ignoring unemployment and financial reform.
Who said Princetonians don’t look after one another? First it was Krugman (albeit half-heartedly), and now it’s Blinder. Two Democrats supporting a Republican? So post-partisan!
Blinder’s thoughts after the jump!: