Outside editorial: Give Bernanke another term

Posted: Wednesday, January 27, 2010

No Federal Reserve chairman seeking reappointment would be a shoo-in after the cataclysmic events of the past three years. The economy suffered a major shock: Credit markets seized up, unemployment rose - and remains high - and billions were shoveled into financial institutions to save the system.

Ben Bernanke won't get an A-plus for his performance, but he deserves another term. He did well enough to keep the economy from slipping into a full-fledged depression.

Objections have been raised in the Senate to his reappointment after his term runs out Sunday. That means reconfirmation will require 60 votes, but the White House says it has the needed votes lined up. If so, that's welcome news.

Some of the objections raised on Capitol Hill are baldly political - a populist reaction to Wall Street bailouts that were deeply unpopular.

Some senators, including Majority Leader Harry Reid, are pressuring Bernanke to pump out even more liquidity, on top of the steps taken already. That would be reckless. Interest rates have been near zero for more than a year, and don't forget the Fed's mortgage bond buying binge and its quantitative easing policy - central bank jargon for creating money out of thin air.

The markets have noticed. The dollar has slumped and over the last few months the price of gold - a rough barometer of future inflation and generalized fear - has risen steadily. For the Fed, these are danger signs that must be heeded.

The spectacle of inflation-promoting politicians spouting populist rhetoric and piling on the Fed chairman is a troubling sight in itself. Should Bernanke be voted down, that would create more uncertainty in the markets.

In the face of an unprecedented crisis, forced to make quick decisions with imperfect information, Bernanke steered a course away from disaster. We'll never know what might have happened if someone less able was making the key decisions. For that, we're probably fortunate.

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