So President Barack Obama has offered Ben Bernanke a second term as chief of the Federal Reserve, the US central bank.
Krishna Guha, the FT’s US Economics Editor, has pointed out that economists, investors and fellow central bankers overwhelmingly favour the Fed chairman’s reappointment. Francesco Guerrera, the FT’s US Finance and Business Editor, says the same is true of Wall Street bankers. Stephen Roach, however, writing for the Financial Times, makes the case against Bernanke.
The chairman of Morgan Stanley Asia likens the decision to a doctor who has been guilty of malpractice being given credit for coming up with a miracle cure. The Baseline Scenario, a US blog, asks which Bernanke will be reappointed.
Stephen Lewis, of Monument Securities in London, argues below that Bernanke, “like generals of old, is intent on fighting the last war – battling a 1930s-style depression”. But he says the Fed chief had so far overlooked bank reform as a pre-condition of sustainable economic growth.
In Frankfurt, Ralph Atkins, the FT’s bureau chief and ECB-watcher, called the move a clear endorsement of Bernanke’s proactive approach to policy-making. Jean-Claude Trichet, president of the European Central Bank, promptly welcomed the reappointment of his US colleague.
John Vail, chief global strategist at Nikko Asset Management in Tokyo reckons a second term will be “modestly positive” for the Japanese bond and equity markets because of the continuity Mr Bernanke’s reappointment would bring. “Japan prefers stability and so far [the Bank of Japan] has had a very good working relationship with the Fed under Bernanke.”
The Bernanke story will at any rate help the administration shift the focus away from less palatable news including the release of national debt numbers showing US federal debt projected to rise by $9,000bn in the next decade. Even before the budget numbers, the headlines have been dominated by tortuous healthcare reform, CIA interrogation techniques, and a fraught Afghan election.