An Opening at the Fed?

There’s some talk that Bernanke won’t be reconfirmed as Fed chair and speculation about an alternative. Brian Johnson suggested Paul Krugman which surprised me given my view of his interest in political nuance. Krugman himself called Johnson’s idea crazy and James Kwak countered that it isn’t as crazy as Krugman thinks, but concludes that Krugman is probably serious that he doesn’t want the job anyway.

My thoughts on Krugman are closer to those of Tyler Cowen who writes,

[H]e is too dedicated to reading and writing and speaking his mind.  The Fed Chair has to be an expert on building consensus and at maintaining more credibility than Congress; even when the Fed screws up you can’t just dump this equilibrium in favor of Fed-bashing.  What lies on the other side of that curtain isn’t pretty.  Would Krugman gladly suffer the fools in Congress?  Johnson and Kwak are overrating the technocratic aspects of the job (which largely fall upon the Fed staff anyway) and underrating the public relations and balance of power aspects.  It’s unusual that an academic will be the best person for the job.

Meanwhile, James Hamilton argues that Bernanke should be reconfirmed and concludes his post with links to the opinions of many others (just in case you’re interested). Since many macro-economists I trust (DeLong, Thoma, and Hamilton himself) who follow the Fed more closely than I are in favor of keeping Bernanke at the helm I’m inclined to go along. That’s especially so because the turn against him seems to be a form of political cover against populist backlash, which is far from the best reason to change Fed leadership at a time of economic fragility.

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