Buh-bye.
Fed Chair Ben Bernanke's term expires early next year, and there's been much debate over whether President Obama should keep the head of the U.S. central bank around for another five years or replace him. Signals from within the administration are opaque thus far, but it wouldn't be surprising to see Obama keep Bernanke, both out of symbolic bipartisanship and because Bernanke, an expert on financial crises, has cooperated extremely closely with the administration's policies and indeed deserves a lot of credit for his ambitious actions to spur recovery. But despite all that, we should have a new Fed chair by this time next year.The main reason is that for all his facility in addressing the crisis, he bears a large responsibility for its causes. Dean Baker argues convincingly that Bernanke shouldn't be rewarded for his negligence as a key economic policy-maker in the years leading up 2008, observing that Bernanke was a member of the Board of Governors since 2002, was head of the Council of Economic Advisors from the middle of 2005 until he took over as Fed chair in 2006, and then was calling the shots ever since. There were few people better positioned than Bernanke to try to burst the bubble before it grew to such dangerous levels.While the actual task of identifying bubbles is by no means an easy one, it's clear that Bernanke (and much of the rest of the economic establishment) ignored many indicators and voices of dissent in the years prior to the collapse of the housing market. That, combined with on-going transparency issues at the Fed, suggests that we need new leadership there. Plus, while Bernanke's crisis management was laudable, we're going to need a Fed chair who can manage a responsible recovery -- and prevent a future crisis -- in the next five years, which is not necessarily the current incumbent's strength.Dani Rodrik has an idea for what kind of person to pick in Bernanke's stead: someone who is "instinctively sceptical of financial markets and their social value." He argues that the new Fed chair should be look askance of financial innovation and efficiency, which makes sense given what we've learned in the last few years about regulators who take Wall Street at its word. Rodrik says the Great Mentioner -- reminds me of the heady days of transition -- is talking about Larry Summers and Janet Yellen for the post. Summers might not be bad; he has tilted much more to the left in the past year and is a voice for more progressive policy in the White House. I know less about Yellen, but Wikipedia tells me she is "considered by many on Wall Street to be an Inflation Dove (as concerned with unemployment as inflation)" so that seems pretty good.
-- Tim Fernholz
