I’ve just got back from the hearing – all five hours of it. Looks pretty clear there’s a majority for Bernanke’s reappointment. But there may not be a majority for his vision of what the Fed should look like in the future.
Bernanke wants to keep bank supervision and add systemic risk powers to fight bubbles. Most of the committee seemed to lean towards the Dodd plan to carve out those responsibilities along with consumer protection, which no-one really thinks belongs inside the Fed.
I think of this as a “broad Fed” model with a strengthened financial stability role vs a “narrow Fed” model focused on monetary policy.
The battle is not over. But how it plays out will have significant consequences for the conduct of macro policy in the future.
