Diane Swonk, Chief Economist
Aug. 24, 2009 – 9:25 p.m.
Bernanke
At approximately 9:30 p.m. Eastern Standard Time (EST) tonight, the White House announced that President Obama plans to reappoint Fed Chairman Ben Bernanke to a second term. The President is expected to make the formal announcement tomorrow morning, Tuesday, August 25, at 9:00 a.m. EST, taking a break from his vacation in Martha's Vineyard. Obama will appear with Bernanke by his side.
This will no doubt come as welcome news to financial markets, which would prefer continuity over change during such a critical time. Few (if any) are better qualified than Ben to undo what has been done to avert another Great Depression.
Few also know the risks that lie ahead, and can create the consensus necessary to keep the Fed on track without losing its independence. This last point is perhaps the greatest challenge Bernanke faces – he must maintain the Fed's independence even as he attempts to rework the infrastructure of the financial system.
If Congress were ever to gain control over the Fed's balance sheet, abandon ship and move! Countries that have followed that model have failed miserably – Argentina comes to mind.
No Tears for Larry: Larry Summers was obviously hoping to get a shift at the Fed at some point in his career. He is still young enough that his chance could easily arise again. Moreover, word has it among many headhunters that Larry was already testing the waters a bit earlier this summer, and will not have too hard of a time replacing his 2008 salary of $8 million if he returns to the private sector.
Or, there is always Tim Geithner's job as treasury secretary. Many still speculate that Tim will be the sacrificial lamb for all that went down in the final days of Lehman, the missteps of the stimulus plan, health care reform...you name it. Referring to Tim as a lamb, however, is not quite accurate – maybe a wolf in sheep's clothing would be more accurate.
Anyway, the Bernanke decision is out and it is good news – and good news is hard to come by these days.
© 2009 Mesirow Financial Holdings, Inc. ("Mesirow Financial"). All rights reserved.
The information in Diane Swonk's Fed Flash is the proprietary and copyrighted material (the "Copyrighted Material") of Mesirow Financial. The Copyrighted Material, or any portion thereof, may not be reproduced, retransmitted or submitted to any media outlet, or posted on any Web site aside from mesirowfinancial.com without the express written consent of Mesirow Financial. This information provided here in is believed to be obtained from sources deemed to be accurate, timely and reliable. However, no assurance is given in that respect. The reader should not rely on this information in making economic or other decisions. The views expressed herein are those of the author and may not necessarily represent the views of Mesirow Financial, its operating businesses or other of its employees. This communication does not constitute an offer or solicitation, or solicitation of any offer to buy or sell any security, investment or other product. Likewise, this communication serves to provide certain opinions on current market conditions, economic policy or trends and is not a recommendation to engage in, or refrain from engaging, in a particular course of action.
