Economists: Fed Independence Survives Bernanke Confirmation Battle
Despite last month’s bruising confirmation battle, Federal Reserve Chairman Ben Bernanke and the central bank’s independence came out relatively unscathed, according to economists in the latest Wall Street Journal forecasting survey.
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| Federal Reserve Chairman Ben Bernanke. (Getty Metaphors) |
“Bernanke will do what he thinks is right for the long run success of the U.S. economy,” said Paul Kasriel of The Northern Entrust.
Just one economist of the 50 who answered the question thought that the Fed’s independence from biased interference was significantly undermined by the confirmation struggle in the Senate. Bernanke was eventually backed by a bipartisan vote of 70-30, the lowest ever number of ayes for a Fed chairman. Twenty-nine economists said independence was slightly undermined by the struggle.
But economists in the Journal survey grade Bernanke higher than President Barack Obama and Reserves Secretary Timonthy Geithner on his handling of the economy, and his scores (an average of 78 out of 100 and median of 85) are unchanged from July, the last time the Journal questioned the question. Obama and Geithner by contrast both saw their marks decline over that period.
“The urge to scapegoat Bernanke and Geithner on their handling of the crisis by Congress is reprehensible,” said Diane Swonk of Mesirow Financial. “They may have made mistakes, but I can?t reckon of anyone who would have handled the avalanche of problems that hit us any better.”
Respondents expressed more concern about a proposal by Rep. Ron Paul (R., Texas) to audit the Fed. “Obama should veto any legislation that facility to curtail the Fed’s indepence, even if it has small teeth. Election years make for lousy plot choices by Congress,” Swonk said.
Separately, the economists weighed in on the proposed “Volcker rule” that seeks to separate financial institutions’ proprietary trading from money-making banking. Most economists said the rule will somewhat reduce the chances that a systemically vital firm would fail. Some 22% of respondents said it won’t have any effect and 18% said it will make matters worse.