Ben Bernanke will be nominated for a second term as chairman of the Federal Reserve. But which Bernanke are we getting? There are at least three.
- The Bernanke who led the charge to rescue the US (and world’s) financial system after the Lehman-AIG collapse. If you accept that the choice from late September was “Collapse or Rescue,” this Bernanke did a great job.
- The Bernanke who argued for keeping interest rates low as the housing bubble developed. This Bernanke was part of the Greenspan Illusion – the Fed should ignore bubbles and “just clean up afterwards.” Is that still Bernanke’s view? Surely, he has learned from that experience.
- Then there is Bernanke-the-reformer. Given #1 and #2 above, shouldn’t he be pushing hard for tough re-regulation of the financial system – particularly those dodgy parts where markets meet banking? But is there any sign of such an agenda, even with regard to recently trampled consumers – let alone “too big to fail” financial institutions?
Most likely, we’re in for another bubble. Continue reading “Which Bernanke? Whose Bubble?”