Federal Reserve Chairman Ben Bernanke took to a newspaper opinion page this past weekend to make the case for continued central bank independence and bank regulatory power.
He’s in a dogfight with Congress about basic tenets: monetary policy autonomy, the right to oversee large financial institutions and even the decentralized structure of the Fed.
So it was disappointing that Bernanke in his Sunday Washington Post piece stuck to a staid, dignified and reasonable approach.
After all, this is about Congress presumably channeling populist anger about the credit crisis, the ensuing recession and the government bailouts that led to a recovering Wall Street and a still very wounded Main Street.
The Wall Street Journal noted today the Bernanke article “was unusual because nominees typically maintain a low profile before confirmation hearings.” The Senate Banking Committee takes up on Thursday Bernanke’s nomination to continue to lead the Fed.
The Journal said Bernanke was willing to break with convention by writing. Good, he should have broken with it in a more powerful way. Fight fire with fire.
How about this as a suggested alternative start to a follow-up opinion piece from Bernanke?
‘Have we lost our bearings, people?
‘An indpendent central bank (as far as that is actually feasible) is an essential, non-negotiable prerequisite to a modern, open economy. Look around you at which countries have autonomous central banks and which do not.
‘It is crazy to even be seriously discussing crimping our independence.
‘We, like other government entities, screwed up royally in our oversight of the crazy risks investment and commercial banks were piling on before it all came apart. We can even (under a prior Fed regime) be second-guessed on monetary policy decisions.
“But we’ve had our successes, too. There would have been figurative blood in the streets if we at the Fed didn’t step in to the abyss in the fall of 2008 and a 10.2% unemployment rate would now look like an unreachable aspiration rather than a near-peak in a terrible recession. If you take the longer view, we’ve done okay on monetary policy in the past 30 years or so.
‘Most important, what’s the alternative? A central bank to a significant degree run by Congress? Congress. Think about that. I believe I can rest my case.’
Instead of tough, tough talk to meet the indpendenced threat, we got a mostly well-reasoned essay from Bernanke. He did a better case defending independent monetary policy than he did justifying continued or increased bank regulation. Thta’s because the case for the former is indeed the much stronger one.
This reader only inferred his dander rising once, when Bernanke cited the Fed’s role in keeping the credit crisis from ending up as a reasonable facsimile of the Great Depression. “I know something about this,” he wrote in parentheses, “having spent my career prior to public service studying these issues.”
Even if Bernanke doesn’t pick up pen again on this, he will surely get a chance to be direct and forceful on Thursday in defense of the very good cause of Fed independence. You know the Senators will have their best populist outrage working.