The intelligent and thoughtful Edmund Andrews presents the current Wall Street consensus on Bernanke reappointment brinkmanship:
Bernanke Brinksmanship: Could the Democratic debacle in Massachusetts derail Ben Bernanke’s Senate confirmation to a second four-year term as Fed chairman? I wouldn’t bet on it, but... there is strong smell of panic among Democrats and a growing push to assuage popular fury on the right and the left... two more Democrats announced that they would vote against Bernanke.... By the end of the day on Friday, a spokesman for Harry Reid, the Senate majority leader, was saying Reid didn’t know if he could round up 60 votes to clear a filibuster and hadn’t himself decided whether to support him. The Republicans are probably even more hostile, even though Bernanke is a Republican who was originally nominated to the Fed by George W. Bush....
It’s true that Bernanke was complicit in Fed’s mistakes leading up to the crisis.... But it’s also true that Bernanke has been heroic in responding to the crisis once it arrived. He didn’t just lower interest rates. He took Fed policy to places few had even imagined before, using every tool and lever he had or could design to fight the epic collapse in credit markets. The time to go after Bernanke, for those who wanted to, was when his nomination was before the Senate Banking committee....
The problem with opposing his nomination now is that it threatens to leave the Federal Reserve rudderless – never a good idea, but especially not when the economy and markets are still fragile. Nominating a successor to Bernanke, getting him or her approved by Senate Banking and then getting that person approved by the Senate, where NOTHING passes without a supermajority of 60 votes, would take months.... [T]o the markets, Bernanke would be a lame duck who wouldn’t have the same credibility. He would likely be seen as hesitant to undertake big new initiatives or to chart course changes, and he might have more trouble herding the hawks and doves together on the Federal Open Markets Committee. What would that mean? Uncertainty, reluctance to invest and possibly higher interest rates if foreign investors began to worry about lax controls over inflation. At this juncture, that strikes me as a dangerous game to be playing.
Bruce Bartlett says that it wouldn't be so bad:
Thoughts on Bernank: Opposing Bernanke at this point is almost costless for everyone involved. If he is not reconfirmed as chairman he will still remain a member of the Board because his position as chairman is separate from his position as a member of the Board.... Don Kohn, is highly respected and been with the organization forever. He will simply take over the formal duties as chairman once Bernanke is no longer chairman. Third, the Fed, by its nature, tends to operate by consensus. So it doesn't really matter very much, insofar as monetary policy is concerned, whether Ben is chairman or merely a member of the Board.... Fourth, there is no obvious replacement for Bernanke who could get confirmed any more easily than him.... Ben's strength is as an economist and analyst. Whether he is chairman or not, his perspective will be respected by the other Board members.... [T]he issue of Bernanke's reconfirmation as chairman is a bit of a red herring. I don't anticipate any meaningful change in policy.
And Jim Hamilton says that yes, it would be so bad:
Why Bernanke should be reconfirmed: Please permit me to suggest that intellectual stamina is the most important quality we need in the Federal Reserve Chair right now.
I wonder which of previous Fed Chairs critics think would be better for the job than Bernanke. Surely you don't think we'd have been better off bringing Alan Greenspan back? G. William Miller fumbled badly with much simpler problems. Arthur Burns is a case study in how not to conduct monetary policy. And while I believe that Paul Volcker was the right person for the job at the time, I'd worry about whether he could adapt his hard money views to the subtlety of balancing the current short-run deflationary pressures with the inflationary potential of longer-run budget deficits. If you roll the dice, statistically you're likely to get someone more like the previous four than Bernanke.
I shake my head when I look at the list of senators who say they'll vote "no." How could there possibly be an alternative whom Barbara Boxer (D-CA) and Jim DeMint (R-SC) would both prefer to Bernanke?
Perhaps some senators reason that a "no" vote could score them political points. If so, it's all the more reason to be alarmed.