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Reconfirm Ben Bernanke...

Paul Krugman worries about his friend Ben Bernanke:

Bernanke and the cover curse - Paul Krugman Blog - NYTimes.com: So Time magazine has named Ben Bernanke Person of the Year. Be afraid, be very afraid. The magazine cover curse is a well-known phenomenon: you should always short the stock of a company whose CEO is the subject of a glowing cover story in a major magazine...

And immediately after I see this:

David Dayen: FDL News Desk: Jeff Merkley To Vote Against Bernanke Confirmation: Sources tell FDL News that Sen. Jeff Merkley (D-OR), a member of the Senate Banking Committee, will vote against Ben Bernanke’s nomination for a second term as Chair of the Federal Reserve.... [A]t least five Senators have placed a hold on a Senate floor vote, with many of them blocking the nomination until they get a standalone vote on auditing the Federal Reserve.... UPDATE: Here’s Merkley’s statement:

Tomorrow, I will vote against confirming Ben Bernanke as Chairman of the Federal Reserve. The reason, in short, is that as Chairman, Dr. Bernanke failed to recognize or remedy the factors that paved the road to this dark and difficult recession. Following our economic collapse, it is also apparent that he has not changed his overall approach to prioritizing Wall Street over American families. My decision is based on my fundamental belief that our economy cannot recover if we do not put Main Street first.... As a member of the Board of Governors, Chair of the Council of Economic Advisers, and then ultimately as Chairman of the Board of Governors, Dr. Bernanke supported each of these decisions, failing to take the necessary precautionary steps that could have averted or mitigated financial collapse.... [A]lthough Wall Street prospered in the short-term from reduced leverage requirements, securitization of faulty mortgages, and the explosion of derivatives, Americans did not. The expansion that occurred from 2002 to 2007 became the first economic expansion in which working families were worse off at the end than at the beginning. This is not a path that we can afford to travel again.

In my view, Ben Bernanke has made four mistakes--at least three of which I said at the time were mistakes:

  • Not supporting Ned Gramlich's push for tighter regulatory oversight of mortgage financing and associated securitizations and derivatives.

  • Not moving immediately in early 2008 to nationalize more of the banking system and support asset prices to a greater extent.

  • Believing in the late summer of 2008 that the big problem was that the Federal Reserve had pumped too much liquidity into the economy, and believing that a bankruptcy on the part of Lehman Brothers would send a healthy message to bankers that they would not always be bailed out by the government and would send that maessage without having damaging consequences for the economy as a whole.

  • Failing to walk down the strategy tree in the fall of 2008 and thus to place a high priority on ensuring that if the government's interventions in financial markets worked to stabilize asset prices and avert depression then the government would profit and would be seen to profit healthily from its interventions.

In these mistakes, Bernanke played second fiddle (and Geithner played third fiddle) to first Alan Greenspan and then Hank Paulson. But they were not Paulson and Bernanke's mistakes only: they were Bernanke's.

Now I am morally certain that had I been in Bernanke's (or Paulson's, or Geithner's) shoes over the past two years, I would have made more and bigger mistakes, and we would right now be worse off. He has done better as Fed Chair than I would have, or indeed that almost everyone I can think of would have. So I am inclined to judge Bernanke lightly, and say that the Senate should confirm him for a second term in spite of his mistakes: he is, I think, one of the very best we can get for the job right now, and he won't make the same mistakes again