Bernanke Tries to Save His Job

So upon waking this morning to peruse the financial news, I get slapped in the face with this most exaggerated headline on Marketwatch, proclaiming that Bernanke has saved the world.



My immediate response was to snicker, thinking that the headline's boasts were just as inflated as the market in recent months. My second thought was that here is the supposedly "apolitical" Federal Reserve playing politics. It's inevitable and incredibly naive to think that this institution doesn't play around in the realm of politics, and during the Fed's recent meeting in Jackson Hole, Wyoming, the spotlight is on and Bernanke now has to say some wonderful things for the camera, not so he can save the world, but so he can save his own job.

You see, Bernanke's reappointment is coming up soon, and Obama may decide to pick someone else for the role of Fed chairman, perhaps someone who is willing to craft monetary policy that is in line with the White House's own inflationary fiscal policy. Larry Summers, Obama's chief economist, is waiting in the wings to snatch up the lucrative job. And so, Bernanke has to audition for his position, exclaiming all the virtues he has caused to arise in a time of deep recession.

So Bernanke proceeded to grandstand, and spoke about how the Federal Reserve under his leadership acted so wonderfully to mop up the chaos in the banking sector that exploded last September and October with the failure of Lehman Brothers, AIG, Wachovia, and WaMu. And yet he fails to mention even once, what the leading failure was that led us to this point in time, that put our financial sector on the brink of destruction. The Federal Reserve takes full on blame for inflating the housing bubble, that when popped, caused the economy to go into the deepest economic downturn since the Great Depression. Sure there are other factors that have contributed: Repealing Glass-Steagall, failure to enforce regulation upon credit derivatives, and free loans for every deadbeat in America. But by and large, the Federal Reserve's move to slice interest rates down to 1% during the last recession, caused the housing bubble in the first place.

Yes, Bernanke wasn't responsible for that. It was under Alan Greenspan's tenure that such dramatic bubble-making was pursued. But I guess it would be bad form for Bernanke to criticize Alan Greenspan for lowering rates when Bernanke himself has lowered rates down to 0%. Insinuating Alan Greenspan's guilt would only serve to implicate Bernanke in whatever consequences should follow from his move into quantitative easing. And so Bernanke stays mum on that guilt and continues to pump up the results of a "job well done" and continues to pump up the stock market as well. He exacerbates his lies to the public, telling anyone who will listen that the recession is over. This is purely to protect his job, for how can Obama validate replacing Ben Bernanke when the recession has ended and the Fed under his leadership has sucessfully contained the crisis. Right?

All that remains for Bernanke to do, is to keep his fingers crossed behind his back, and hope that nothing untoward creeps out of the financial or housing sectors in the months to follow. At least until he gets reappointed. Only then can he let the mountain begin to crumble again.

Read Bernanke's speech HERE.