Bernanke defends bailouts – and himself

In March, Federal Reserve Chairman Ben Bernanke appeared on CBS’s 60 Minutes. On Monday, he did a town hall with Jim Lehrer of the NewsHour. What’s next? Oprah? Hardball with Chris Matthews? Three minutes with the Today Show’s Al Roker?

Maybe it wouldn’t be a surprise if he did all of them. Mr. Bernanke’s term as chairman of the Federal Reserve expires at the end of January – and it may not be too soon to remind President Obama about who kept the economy out of another Great Depression. And some economists say such appearances might help the Fed chairman’s reputation after a particularly bruising session last week with Congress.

“He’s running to keep his office and defend the Fed,” says Robert Brusca of Fact & Opinion Economics in New York. “The President is wondering who to appoint and Congress is looking for a scapegoat.”

It is relatively rare for the public to actually be part of the process of picking the Fed chief. The behind-the-scenes effort is usually more likely to include hints from Wall Street gurus or a kind word from the chairman of a Senate committee.

“The job has always been political in many ways, but they never admitted it,” says Doug Roberts, director of research at Channel Capital Research in Shrewsbury, N. J.

Former Fed chairman Alan Greenspan was particularly adept at cultivating connections, says Mr. Roberts. “He was a Washington insider,” he says. “Even though he was appointed by President Reagan, he had a good relationship with President Clinton. He knew who buttered his bread.”

But Greenspan never had to face the dire economic circumstances faced by Bernanke, who has had to keep the financial system from crumbling. And some of those Fed interventions, as Bernanke is learning, have not gone over well with the public. At his Kansas City Town Hall meeting – moderated by PBS’s Mr. Lehrer – one small business owner said the bailouts were “tough to swallow.”

Bernanke, abandoning his normal professorial mien, told the questioner, “I had to hold my nose,” over the bailouts. But, he also added, he wasn’t going to be the Fed chairman who “presided over the Second Great Depression.”

President Obama will have to decide soon about Bernanke’s reappointment, economists say.

“[Y]ou don’t want to have three months left and not have made an announcement,” says Mr. Brusca.

If Bernanke is not selected, he would probably stay until the next chairman can take up the job, he adds. “But, the markets prefer not to have a lame duck Fed chairman.”

If Obama reappoints Bernanke, it would not be the first time a president has chosen to keep an inherited appointment. In 1983, Ronald Reagan inherited Paul Volcker from President Carter. “Volcker was not Reagan’s first choice but he kept him on for a term,” recalls Roberts.

One decision-maker on whether Bernanke stays or goes could be Obama’s chief economic policy guru, Lawrence Summers. There is speculation he would like the job.

“A key factor could be the economy – if it continues to improve, he may want to reappoint Bernanke,” says Roberts, “if it deteriorates he may want a change.”

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