Bravo, Mr. PresidentOctober 22, 2012 Posted by: Joe Morgan, CFA
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 Bernankefor 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 itreveals about the intentions of the current administration.
For months, I have been concerned with the starting and stopping ofseveral government "aid" programs as a continuously changingplaying field keeps would-be participants on the sidelines. Butgetting out in front of the media and most market pundits on thequestion of who will run the Fed eliminates a significant piece ofpotential misinformation for the markets.
There's little doubt Ben will be confirmed for a second term, evengiven his bold and sometimes offensive actions at the Fed. Thoughhe has proven the maxim that you can't please all of the people allof the time, it's difficult to argue whether another occupier ofthat chair would have the qualifications to navigate the economicmess we are in today.
In addition, Bernanke has great incentive to get the economy backon track. At a salary of around $200,000, it's clear this job isattractive for reasons other than compensation. Specifically, thereis the power it necessarily contains, the Rolodex that will bebuilt and potentially used after serving and, of course, thebenefits provided to one's ego.
If Bernanke can help steer the economy to recovery over the nextfour years (or even if it takes longer), he will have satisfied allthree. The antithetical view is that he is most motivated to keepthe economy from continuing to languish, as there is a good chanceit will go down as his "fault" in history. ("History" is neverfair.)
So, one can see that making a switch at this point in the gamesimply does not make sense. But what of the timing of thisannouncement?
If Obama had waited until later this year, he could have garneredmore press and potentially more praise should this decision...Read More