Friday, January 22, 2010
Bernake's Confirmation
There is a very good theoretical debate regarding the importance of the Federal Reserve's need for Independence. For the most part the past three presidents of the Federal Reserve have been independent from politics (which most economists would agree is a good thing). But this is one of the very rare times when the spot light is put on the political bureaucracy of appointing the president of the Fed (or in this case re-appointing him).
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Becca Keener
ReplyDeleteThe American Economy 0858: Sect. 2 (MWF 10-10:50)
The Federal Reserve is the central bank of the United States and incorporates 12 Federal Reserve branch banks and all national banks and state banks. Although it is the central bank of the United States it has been independent of United States politics to the best of its ability. Now, as the United States is facing the recession and is in financial turmoil, people seem to be asking where the Federal Reserve has been in the years leading up to the present condition of the United States. Large financial companies are participating in casino-type activities while small businesses are struggling and middle class citizens are losing their homes. It seems like citizens are asking the Federal Reserve to give up its independence and join the political rally to help the United States out of its current state. I guess people see it as we need help, and that politics teamed with the Federal Reserve might be the help we need.
Abigail Cohn
ReplyDeleteAmerican Economy, Section 1
"Adding politics" to the Federal Reserve may allow for more opinions regarding the current financial situation to be expressed. The addition of politics may allow for the creation of new ideas for how to solve the economic turndown.
I don't think politicizing the Federal Bank is the answer. Leave the decision making to the experts, not the politicians who are going to make a circus out of it, not to mention heeding the uninformed public's opinions in order to secure votes. So, keep the Fed independent.
ReplyDeleteMaybe the problem, and of course I know nothing of the matter, is Bernake. Certain philosophies fit certain times, and perhaps his philosophy, if not fundamentally flawed, is just ill-timed. I have to give him the benefit of the doubt. You don't rise to the position he is in without really knowing what the heck you're talking about. So, I imagine his philosophies are simply ill-timed.
So, what do you do? Well, our "Taking Sides" text for this class seems to me to be substantial concrete proof that there are at least two legitimate arguments/philosophies to these economic questions. If we could find some well-read economic geek with a little big-time experience and a different perspective then old Ben's, then we may have the answer we're looking for.
I do believe that the best thing to do is the keep the Fed independent. But, Time magazine puts up a pretty tough argument with the article they wrote on Bernake when they named him 2009's Person of the Year. Here is a clip of the article. Now, you be the judge...
ReplyDelete"Bernanke is the 56-year-old chairman of the Federal Reserve, the central bank of the U.S., the most important and least understood force shaping the American — and global — economy. Those green bills featuring dead Presidents are labeled "Federal Reserve Note" for a reason: the Fed controls the money supply. It is an independent government agency that conducts monetary policy, which means it sets short-term interest rates — which means it has immense influence over inflation, unemployment, the strength of the dollar and the strength of your wallet. And ever since global credit markets began imploding, its mild-mannered chairman has dramatically expanded those powers and reinvented the Fed.
Professor Bernanke of Princeton was a leading scholar of the Great Depression. He knew how the passive Fed of the 1930s helped create the calamity — through its stubborn refusal to expand the money supply and its tragic lack of imagination and experimentation. Chairman Bernanke of Washington was determined not to be the Fed chairman who presided over Depression 2.0. So when turbulence in U.S. housing markets metastasized into the worst global financial crisis in more than 75 years, he conjured up trillions of new dollars and blasted them into the economy; engineered massive public rescues of failing private companies; ratcheted down interest rates to zero; lent to mutual funds, hedge funds, foreign banks, investment banks, manufacturers, insurers and other borrowers who had never dreamed of receiving Fed cash; jump-started stalled credit markets in everything from car loans to corporate paper; revolutionized housing finance with a breathtaking shopping spree for mortgage bonds; blew up the Fed's balance sheet to three times its previous size; and generally transformed the staid arena of central banking into a stage for desperate improvisation. He didn't just reshape U.S. monetary policy; he led an effort to save the world economy."
Here is the full article if anyone is interested: http://www.time.com/time/specials/packages/article/0,28804,1946375_1947251,00.html
I am as blue as they come, yet in this situation I truly believe that the Fed should be independant and free from political party influence. As we expect from they high court in regards to legislating from the bench, we should have the same expectation from the fed chief whereas policy is stated not for political bias but for economic well being.
ReplyDeleteMaria Villanueva from American Economy
ReplyDeleteI do believe that it will be a good idea for them to appoint someone else to hold the seat in the federal reserve. Maybe thats what they need is for some new change. When reading this artice i did not agree with the remark of pushing banks to give out loans so that americans can keep their homes. This goes back to a discussion in class where we talked about the housing market connected to wall street. If the banks would not have given the loans out in the first place to people that could not afford to pay then maybe we would not be in such a big mess. Also maybe people would of been living in places that they could afford. Overall i do not think that it is a bad idea for politics to get involved.