Issue of the week: Does Bernanke deserve a second term?

Federal Reserve Chairman Ben Bernanke “has become a lightning rod for public anger that Wall Street got bailed out and Main Street didn’t,” said David Wessel in The Wall Street Journal. Bernanke’s four-year term expires Jan. 31, and last week, he testified before an often-hostile Senate Banking Committee, making the case for his reappointment to a second term. It wasn’t pretty. Legislators from both ends of the political spectrum took him to task for a host of perceived offenses, beginning with his decision to pay AIG’s trading partners in full when the giant insurer couldn’t make good on its financial bets. Accusing Bernanke of handing out “cheap money to your masters on Wall Street,” Republican Sen. Jim Bunning of Kentucky called the Fed chairman “the definition of moral hazard.” Even his chief supporter in the Senate, Connecticut Democrat Chris Dodd, came out in favor of stripping the Fed of its regulatory authority. After the grilling, practically the only question remaining for Bernanke is, “Why exactly do you want to go through this for another four years?”

More to the point, why would the American people want him to? asked Dean Baker in HuffingtonPost.com. “Bernanke bears much of the blame for this economic collapse.” Before taking charge of the Fed in 2006, he was a high-ranking official there, and “better positioned than any other person in the country to prevent this disaster.” Yet he failed to recognize the massive housing bubble that was building up, or to do anything to bring it under control. Worse, he then helped inflate the bubble by keeping interest rates too low for too long, said The Wall Street Journal in an editorial. We are now “in another period of extraordinary monetary ease,” and Bernanke is blithely assuring Congress that this time, he’ll know when to raise interest rates. Really?

Not only has Bernanke mismanaged the nation’s money supply, said

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Dylan Ratigan in BusinessInsider.com, he has ignored the Fed’s statutory mandate to work to achieve full employment. Instead of using the Fed chairman’s bully pulpit to pressure banks to lend, “with the goal of helping grow new ideas and businesses” and creating new jobs, he has been letting the banks hoard the trillions that the Fed has showered on them. If the Obama administration is serious about tackling the unemployment crisis, “considering a different Fed chairman might be a good place to start.”

Bernanke’s critics are too busy “second-guessing” his decisions to notice how much he has gotten right, said The Washington Post. “When the global economy faced a meltdown in 2008, Bernanke acted creatively and decisively” and staved off “a repeat of the Great Depression.” And it’s not as if Bernanke’s critics can identify anyone who could have done a better job, or who could better handle the “crucial next phase of the recovery.” We suspect that Bernanke’s congressional foes are angling to turn the Fed into “the monetary tool of elected officials.” It’s a relief to know they probably won’t succeed.