Bravo, Mr. President

When the night has come
And the land is dark
And the moon is the only light we'll see
No I won't be afraid
No I won't be afraid
Just as long as you stand, stand by me
- Ben E. King

Last week's decision by President Obama to stand by Ben Bernanke for a second term as Federal Reserve chairman was a brilliant move. Not because Ben is the best guy for the job, but because of what it reveals about the intentions of the current administration.

For months, I have been concerned with the starting and stopping of several government "aid" programs as a continuously changing playing field keeps would-be participants on the sidelines. But getting out in front of the media and most market pundits on the question of who will run the Fed eliminates a significant piece of potential misinformation for the markets.

There's little doubt Ben will be confirmed for a second term, even given his bold and sometimes offensive actions at the Fed. Though he has proven the maxim that you can't please all of the people all of the time, it's difficult to argue whether another occupier of that chair would have the qualifications to navigate the economic mess we are in today.

In addition, Bernanke has great incentive to get the economy back on track. At a salary of around $200,000, it's clear this job is attractive for reasons other than compensation. Specifically, there is the power it necessarily contains, the Rolodex that will be built and potentially used after serving and, of course, the benefits provided to one's ego.

If Bernanke can help steer the economy to recovery over the next four years (or even if it takes longer), he will have satisfied all three. The antithetical view is that he is most motivated to keep the economy from continuing to languish, as there is a good chance it will go down as his "fault" in history. ("History" is never fair.)

So, one can see that making a switch at this point in the game simply does not make sense. But what of the timing of this announcement?

If Obama had waited until later this year, he could have garnered more press and potentially more praise should this decision be seen as a "close call." The markets obviously wanted no change at the helm, but with Larry Summers waiting in the wings, this was no easy decision.

Ridding the markets of this uncertainty some four months ahead of time (recall Bush waited until the last moment to nominate Bernanke for his first term), will allow Wall Street to focus on more pertinent developments such as employment, housing and mortgage market development as opposed to divining how a new Fed chair will behave under different scenarios. Like him or not, we know a lot more about Bernanke today than we would any other nominee.

Key Developments

The Conference Board's consumer confidence index rose to 54.1 in August from 47.4 in July. This measure has been bouncing around north of 40 for the last five months as the stock market has recovered.

Durable goods orders in July provided a welcome boost, coming in up 4.9 percent after declining 1.3 percent in June. Over the last year, durable orders have declined 20.4 percent, an improvement from the 24.5 percent decline in the year ended in June. Stripping away the volatile transportation component, orders rose 0.8 percent, in line with expectations.

The Bureau of Economic Analysis reported little revision to its second quarter GDP estimate which now stands at -1.0 percent. Inventory liquidation was revised upward, offset by a smaller estimate of the net export deficit. Personal income and spending data were both near-unchanged as the consumer looks to remain on the sidelines for now.