Bernanke's Fumbles Suggest Deeper Problems
This article was originally posted on the Street Insight section of thestreet.com 5/5/2006 2:42 PM EST
Recent mistakes by the new Fed Chair raise questions about his ability.
The situation also raises questions about the road not taken: The elevation of Vice Chair Roger Ferguson.
On Tuesday, Rob Martorana (Editor, Street Insight section of theStreet.com) said that Fed Chairman Ben Bernanke hurt his own credibility by retracting his dovish comments via CNBC's Maria Bartiromo. Previously, Rob noted that Bernanke has been too dovish, so perhaps this was Mr. Bernanke's form of damage control. But as (Street Insight contributor) Tom Arnold noted, traders don't like to get their news second hand.
Granted, Mr. Bernanke has only been in the job a few weeks, but perhaps it's time to raise the competence question. He sits in the third most powerful job in Washington (the other two being President and Chief Justice of the Supreme Court). This is not a position that allows you to "learn on the job". Remember, Greenspan didn't make similar mistakes when he came into the job. In fact, Greenspan successfully dealt with a far more serious crisis in October, 1987.
The Road not Taken
To make matters worse, there was a far more competent choice waiting in the wings: Fed Vice Chair Roger W. Ferguson, who was widely regarded as the competent heir apparent to Greenspan. I believe that President Bush did not select him because: 1. He is not a Bush loyalist. 2. He is competent, which doesn't fit into the Bush selection mold.
Lest subscribers think I am partisan, allow me to explain. The Fed chairperson has remarkable independence in Washington. This is essential, given the possibility for political tampering. U.S. monetary policy is too important to allow this, and the position merits the absolutely best candidate. Unfortunately, the evidence thus far suggests that the best candidate remains one seat away from the Fed Chairman.
Time will tell.
William Michael Cunningham
- B.A. (Economics) , MBA (Finance), A.M. (Industrial Organization)
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