Fed chairman Ben Bernanke's term is up January 31, lending urgency to a debate that's been simmering since late summer. Friday, we brought you top opinions on why Bernanke might find himself out of work
come February. But could failure to reappoint Bernanke harm the
economy, totally apart from questions of his future job performance?
Over the weekend, some argued that uncertainty surrounding
Bernanke's reappointment could drive down stocks. The debate is pitting
top officials, investors, and economists against irritated finance
- Markets Will Tank if Reappointment Looks Uncertain, predicts Sec. Tim Geithner in a Politico interview with Mike Allen. "I think the markets would view this as a very troubling thing for the economy as a whole." But he says there shouldn't be uncertainty--Bernanke will be reappointed.
- ...And It Looks Uncertain Harvard economist Greg Mankiw rebuts the notion that the reappointment is a done deal: "According to Intrade, the probability that Bernanke will be confirmed for a second term is now about 0.7, which down from 0.95 a few days ago. This uncertainty cannot be good for financial markets."
- Buffet: Let Me Sell Some Stocks Ahead of This In an interview with CNBC, investment god Warren Buffet asks for a day advance warning if Bernanke isn't going to be approved. "If Congress essentially said," he explains, "we can do this better than Ben Bernanke...I would get very worried."
- Obama Afraid of Market Crash? Guessing that markets would indeed "rally somewhat on the prospect of a Bernanke appointment," and admitting that if "Bernanke can't even get fifty percent" in Congress, "it will be a huge shock and the market might crash," Marshall Auerback at Credit Writedowns still thinks Bernanke should be removed. He suggests the president is unwisely "going to bat" for the chairman because "the Rubins of the world have told him that if Bernanke isn't confirmed there will be a market crash and he will be blamed for it. Unfortunately, Obama has fallen for this."
- Democracy of People, Not Markets Popular finance blogger Yves Smith
isn't pleased to discover that "the US has become a country of
democracy by financial markets rather than the ballot box." Points to
analysis arguing that, in any event, "the market reaction is not over
dismay at the prospect of losing Bernanke ... than of the specter of
floundering at the lack of a plan B," she asks readers to start
contacting their senators, telling them to ditch the chairman.