Bernanke saying he’s dispensable suggests tenure winds down

‘Too Valuable’

Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York, disagreed with Bernanke’s statement, saying he has an obligation to stay.

“His knowledge and experience is too valuable to let him go,” Rupkey said today in an e-mail. “The architect of the policy needs to see it through to full completion.”

Bernanke, a student of the Great Depression, took steps unprecedented in the Fed’s 100-year history to steer the economy through its worst crisis since the 1930s.

He used the Fed’s balance sheet to rescue Bear Stearns Cos. and American International Group Inc. from collapse, while supporting corporations and small businesses with innovative lending programs that kept credit flowing as banks struggled under rising amounts of home-loan delinquencies.

He cut the benchmark lending rate to zero in December 2008 to boost the economy and then continued to provide stimulus with outright bond purchases, expanding the Fed’s total assets to a record $3.17 trillion. Yesterday, Bernanke said the Fed would maintain its $85 billion in monthly asset purchases and keep its key rate near zero.

‘Thank’ Bernanke

“You can thank Ben Bernanke that we are not in a global depression,” Bank of Israel Governor Stanley Fischer said on June 27.

Bernanke said yesterday that one of the things he hoped to accomplish and was “not entirely successful at, as the governor or as the chairman of the Federal Reserve, was to try to depersonalize to some extent monetary policy and financial policy and to get broader recognition of the fact that this is an extraordinary institution.”

“It has a large number of very high-quality policy makers, it has a terrific staff, literally dozens of PhD economists who’ve been working through the crisis, trying to understand these issues and implement our policy tools,” Bernanke said. “And there’s no single person who is essential to that.”

Vetting Process

While the Obama administration hasn’t started the formal process of gathering names and presenting them to the president, Jacob J. Lew, Obama’s Treasury secretary, and Gene Sperling, director of the National Economic Council, will probably lead the effort, said one administration official.

Four years ago, in the lead-up to Bernanke’s re-nomination, the process was run by Geithner. Larry Summers, then the director of the NEC, was excluded because he was also interested in the position, said the official.

With the Fed’s chairmanship staggered to the president’s four-year term, the last three Fed chairmen have served a total of six presidents. Five of the last six presidents have inherited a chairman who they then re-nominated.

Bernanke and his immediate predecessors, Paul Volcker and Alan Greenspan, were all reappointed by a president from a different party than the president who initially nominated them.

The circumstances of their eventual departures were unique and depended on their personal relationship with the president.

“It’s not a formal process,” Greenspan said in an interview. “It’s an individual decision by two people: the chairman of the Federal Reserve and the president of the United States.”

Bloomberg News

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