Making the Grade

Ben Bernanke has been re-upped as Fed Chairman. Now he won’t have to grade term papers for another five years.

By re-nominating the current chair, President Obama has made a sensible, risk-averse decision. After all, Bernanke has been a steady hand at the tiller of monetary policy, and has managed his way through the worst financial crisis in most of our lifetimes with few significant errors. In a tenuous time economically, it makes sense to keep the same person as Fed Chair.

But the conflict and confusion about the Fed’s role is unlikely to die off soon. Partly in reaction to last year’s crisis, President Obama has proposed that the Fed regulate the systemic risk in our institutions. Opposition to the proposal ranges from turf-fights to populist opposition to the whole idea of a central bank.
This populist / financier debate has been raging since the earliest days of the Republic. During George Washington’s first term, Hamilton squared off against Jefferson on the role of the national debt. Debate was rekindled when Andrew Jackson refused to re-authorize the central bank’s charter. It’s ironic that both Hamilton (the banker) and Jackson (the anti-banker) are now memorialized on our currency.

These struggles illustrate a key point: America needs a modern financial system, but we don’t naturally trust the financiers. Corruption has been too prevalent. While we surely must rationalize our regulatory structure, the details matter. Let’s hope that as he guides this reform through, Ben Bernanke can continue to get passing marks.

Douglas R. Tengdin, CFA
Chief Investment Officer
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