AP source: Fed's Bernanke picked for second term

[DrDoom]

OAK BLUFFS, Massachusetts (AP) -- Federal Reserve Chairman Ben Bernanke, widely credited with taking aggressive action to avert an economic catastrophe after the financial meltdown last fall, will be nominated by President Barack Obama for a second term, The Associated Press learned Monday night.

Obama plans to make the announcement on Tuesday during a break from his vacation on Martha's Vineyard. A senior administration official discussed the nomination on the condition of anonymity because it was not yet public.

In remarks prepared for the announcement, Obama praised Bernanke for leading the country through a financial crisis and, with his expertise on the Great Depression, helping to prevent a similar crisis.

"Ben approached a financial system on the verge of collapse with calm and wisdom, with bold action and outside-the-box thinking that has helped put the brakes on our economic free-fall," Obama said in prepared marks obtained by the AP.

"The actions we have taken to stabilize our financial system, repair our credit markets, restructure auto industry and help the overall economy recover have all been steps of necessity, not choice. They have faced plenty of critics, some of whom argued that we should stay the course or do nothing at all. But taken together, all of these steps have brought our economy back from the brink. They are steps that are working," Obama said.

AP source: Fed's Bernanke picked for second term - Yahoo! Finance

[DrDoom]

Agreed Bubbles are for bathtubs not policy for running an economy...Obama continues to stake his presidency with a bad lot...it will be his undoing...

Barack Obama has rendered one of his most important post-crisis verdicts: Ben Bernanke will be nominated for a second term as chairman of the Federal Reserve. This is a very shortsighted decision. While America’s head central banker deserves credit for being creative and courageous in orchestrating an unusually aggressive monetary easing programme, it is important to remember that his pre-crisis actions played an equally critical role in setting the stage for the most wrenching recession since the 1930s. It is as if a doctor guilty of malpractice is being given credit for inventing a miracle cure. Maybe the patient needs a new doctor.

Mr Bernanke made three critical mistakes in his pre-Lehman incarnation: First, and foremost, he was deeply wedded to the philosophical conviction that central banks should be agnostic when it comes to asset bubbles. On this count, he stood with his predecessor – serial bubble-blowing Alan Greenspan – who argued that monetary authorities are best positioned to clean up the mess after the bursting of asset bubbles rather than to pre-empt the damage. As a corollary to this approach, both Mr Bernanke and Mr Greenspan drew the wrong conclusions from post-bubble strategies earlier in this decade put in place after the bursting of the equity bubble in 2000. In retrospect, the Fed’s injection of excess liquidity in 2001-2003, which Mr Bernanke endorsed with fervour, played a key role in setting the stage for the lethal mix of property and credit bubbles.

Second, Mr Bernanke was the intellectual champion of the “global saving glut” defence that exonerated the US from its bubble-prone tendencies and pinned the blame on surplus savers in Asia. While there is no denying the demand for dollar assets by foreign creditors, it is absurd to blame overseas lenders for reckless behaviour by Americans that a US central bank should have contained. Asia’s surplus savers had nothing to do with America’s irresponsible penchant for leveraging a housing bubble and using the proceeds to fund consumption. Mr Bernanke’s saving glut argument was at the core of a deep-seated US denial that failed to look in the mirror and pinned blame on others.

Third, Mr Bernanke is cut from the same market libertarian cloth that got the Fed into this mess. Steeped in the Greenspan credo that markets know better than regulators, Mr Bernanke was aligned with the prevailing Fed mindset that abrogated its regulatory authority in the era of excess. The derivatives’ explosion, extreme leverage of regulated and shadow banks and excesses of mortgage lending were all flagrant abuses that both Mr Bernanke and Mr Greenspan could have said no to. But they did not. As a result, a complex and unstable system veered dangerously out of control.


FT.com / Comment / Opinion - The case against Bernanke

[DrDoom]

LOL! Yeah its a bipartisan effort to rip the American people off and have continuity between the Bush Admin and the Obama admin in matters of finance. What a clown!

I guess since Obama is nominating Bernanke to a 2nd term and not reappointing him maybe he'll finally take responsibility for the economy continuing to go down the crapper as a result of letting the Fed continue to manipulate the currency and real economy for the benefit of the banking oligarchy...

Keep digging your own graves....and that of the economy...

Frank Statement on Chairman Bernanke

Washington, D.C. – House Financial Services Committee Chairman Barney Frank today made the following statement on President Obama’s nomination of Ben Bernanke to serve a second term as Chairman of the U.S. Federal Reserve Chairman:

“I strongly support President Obama’s nomination of Ben Bernanke to a second term as Chairman of the Federal Reserve. On the whole, Chairman Bernanke’s response to the unprecedented economic crisis has been wise and appropriate. He has acted to provide needed liquidity to the economy and has demonstrated that he is fully ready to reverse course when economic conditions dictate. President Obama’s decision to reappoint him now is one more example of his providing leadership the country, and the world, needs as well as addressing the economic situation he inherited. By nominating Chairman Bernanke he is giving an example of the right kind of bipartisanship.”

[cwd22]

Bernanke is definitely horrible, but who would have replaced him? It's not like someone else would have rushed in and drastically raised interest rates while doing everything possible to stem inflation. That's just not how the Fed works.

[DrDoom]

Volcker would....but raising rates is politically suicidal right now and would deepen the recession but it is probably necessary since the economy is deleveraging on its own. Trying to prop up insolvent institutions is a drag on the economy as Japan will testify..

However, the Fed itself is the problem. Interest rates will rise by default anyway....the bond vigilantes will demand it.In the meantime Bernanke is going to continue to pour liquidity into the system and when the velocity of the cheap money picks up that's when things will get fugly and there will be another downturn. The Fed has cornered itself...

[DrDoom]

But but but he saved us.....

Ben Bernanke has proved himself a heroic fire-fighter, saving world from a calamitous spiral into debt deflation by showering markets with liquidity.

A good thing too. He helped cause the raging fire of 2007-2009 in the first place. As a Princeton professor and then a junior Federal Reserve governor, Mr Bernanke was the intellectual architect of his predecessor Alan Greenspan's policies that so distorted global finance and pushed debt to historic extremes.

Indeed, he was picked to join the Fed because he provided academic cover for Greenspan's view that asset bubbles do not matter. He blamed credit excesses on Asia's "saving glut", arguing that reserve accumulation by export nations suppressed global bond yields. That let the Fed off the hook for its own role in driving the US savings rate to zero – and consumption through the roof – by holding interest rates below "Wicksell's Natural Rate".

It is this twin-sided nature of Bernanke that raises nagging questions about his reappointment as chairman of the Fed. He has admitted errors: it was wrong to think the sub-prime crisis could be contained. But he has yet to acknowledge that his economic ideology is deeply flawed.

The troubling side of Ben Bernanke - Telegraph