Believe those who are seeking the truth. Doubt those who find it. Andre Gide

Wednesday, August 26, 2009

William Poole on Ben Bernanke

For those of you who may not know, I have recently joined the Federal Reserve Bank of St. Louis as a VP in the research division. Will keep you posted on things that I learn (and am allowed to reveal).

We were recently asked to comment on an article written by Bill Poole, former president and CEO of the Fed here in St. Louis. He asks the question: Should President Obama reappoint Fed Chairman Bernanke? See here. His conclusion is "no." (too late, it appears).

So what's his beef? Essentially, that some of the new policies initiated by Bernanke have violated stipulations in the Federal Reserve Act (FRA) and that, in doing so, he has comprised the Fed's political independence. The relevant stipulations are section 13(3) and section 14(b).

Poole grants Bernanke some leeway in terms of the emergency measures adopted in March 2008 (Bear Stearns) and September 2008 (AIG). But he believes that the Fed's Commercial Paper Funding Facility (CPFF) violates section 13(3). He may have a point here; but there is not much a leg for him to stand on as the term "exigent" is not precisely defined.

Poole also believes that the Fed's buying program for Mortgage Backed Securities (MBS) is not authorized under Section 14(b). I beg to differ. As far as I can tell, the act does allow for purchases of assets that are guaranteed by the U.S. government. The MBS purchased by the Fed are fully insured by the Treasury (and indeed, they are generating a very nice return).

Poole makes some very good points about distancing the Fed from politics as much as possible. But I do not believe that he makes a compelling case against reappointment. Among other things, he does not propose alternative candidates (many of the apparent frontrunners would likely view Bernanke's interventions as too conservative). Bill should be careful what he wishes for.

In any case, it looks like Bernanke will be reappointed (after a good grilling in front of the Senate). Considering the alternatives, I think this was the right choice.


  1. ___________

    Tel Aviv, Friday, 28th August 2009.

    The Puzzle of The Crash and The Sacrifice of Gilaad Shalit.

    In this article I tell that The Crash will take place on Friday, 18nth September 2009 at 4:11 PM EST.

    The reading of that article is of the uttermost importance for everyone.

    It is even more important to the Islamic and Jewish people, the sons of Abraham.

    It presents the causes and consequences of The Crash.

    It proves that Ben 'Systemic Risk' Bernanke engineered deliberately the Great Recession and The Crash

    For Eid ul-Fitr the Hamas will sacrifice Gilaad Shalit.

    Tell the new to the world and free Gilad Shalit on 4th September 2009 at 5:58 Jerusalem Time and everything will be fine for example.

    Some of you may be shocked by the videos and their wordings. Please don't watch them.

    The Puzzle of The Crash and The Sacrifice of Gilaad Shalit.


  2. David,

    Congrats on the position at the Fed of St. Louis. Definitely an interesting time to be working there.