Thursday, June 25, 2009

Bernanke Not Likely to be Reappointed

What would you think if your boss said you are doing a "fine" job? Fine is satisfactory. It's not bad, but it's not good either. Fine means you should be doing better. Fine means your job is in jeopardy. Fine means you should be thinking about shopping your resume.

If you have a contract, you probably won't be fired and you probably won't be asked to resign. But when your term expires, you probably won't be asked to stay on. After all, there are plenty of other people out there who could do a fine job, too.

This is Ben Bernanke's predicament. President Obama, a man who is extremely careful with his words, recently said the Fed Chairman is doing a "fine" job. Earlier today, after Bernanke was grilled by Congress about what he did or did not say to Ken Lewis regarding the Bank of America acquisition of Merrill Lynch, the White House said it has "confidence" in Bernanke. Sounds like another lukewarm endorsement.

I think Bernanke is cooked, which is too bad. I think Bernanke did an excellent job of responding to the economic crisis. Bernanke will complete his term, which expires in January, but it is becoming increasingly clear that he will not be reappointed. It looks like Obama wants his own man at the Fed--namely Larry Summers. Summers probably wanted to be Treasury Secretary, but Tim Geithner got that job. I think Summers now wants the Fed chairmanship, and I think Obama wants to give it to him.