Issue of the week: Does Bernanke deserve another term?

It’s still touch-and-go, but it appears that Federal Reserve Chairman Ben Bernanke will get to keep his job, said Sewell Chan in The New York Times. Bernanke’s eight-year term expires Jan. 31, and in recent days, “a sudden surge of opposition” in the Senate threatened to derail his reappointment. At least 12 senators, Democrats and Republicans alike, came forward to oppose him, Still, “the Senate has never rejected a president’s nominee for chairman since the central bank was created in 1913,” and as The Week went to press, the White House appeared to have the votes it needed. But if Bernanke survives “the populist revolt,” said Colin Barr in Fortune, it will be largely “because of fears that a change will scare the heck out of financial markets.”

That’s a legitimate concern, said Dallas Federal Reserve Bank President Richard Fisher in The Wall Street Journal. The fact is, Bernanke has been used as ���a political punching bag” by Congress, presenting the alarming possibility that going forward, “elected officials will politicize the Federal Reserve and compromise its independence.” Has anyone in Washington considered how global investors would react if they knew that “Congress might seek to pressure the Fed to print its way out of this crisis”? What’s more, bouncing Bernanke now, without an obvious successor, would leave the Fed “rudderless,” said Edmund Andrews in the financial blog CapitalGainsandGames.com. That’s “never a good idea, but especially not when the economy and markets are still fragile.”

Reappointing an incompetent is no way to instill confidence, said John Tamny in RealClearMarkets.com. The Fed’s mandate from Congress is to maintain full employment, low inflation, and a healthy banking system. Under Bernanke, the unemployment rate, which stood at 4.8 percent when he took over from Alan Greenspan, has more than doubled, as has the dollar price of gold, a crucial indicator of inflation. “As for the banking system, its decline while under the allegedly watchful eye of the Bernanke Fed is well documented.” Why should the Senate confirm Bernanke when “the Fed which he oversees has failed miserably”?

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That’s an excellent question, said Paul Krugman in The New York Times. Although I admire Bernanke “both as an economist and for his response to the financial crisis,” his stewardship of the Fed has been disappointing. Especially on the question of employment, Bernanke has displayed “a dangerous complacency,” saying only that the decline in the jobless rate is going “slower than we would like.” But frankly, it’s hard to imagine anyone who’s better getting through the bitterly divided Senate, and we could easily end up with somebody who could do even more damage. “That’s not a ringing endorsement, but it’s the best I can do.”