News / Economy

    New Head For US Central Bank?

    Federal Reserve Chairman Ben Bernanke gestures as he speaks during a news conference at the Federal Reserve Board in Washington,  December 12, 2012.
    Federal Reserve Chairman Ben Bernanke gestures as he speaks during a news conference at the Federal Reserve Board in Washington, December 12, 2012.
    Jim Randle
    U.S. President Barack Obama says Ben Bernanke has done an "outstanding" job leading the central bank and coping with the worst recession in decades.  But some analysts say Obama is likely to appoint someone else to head the Federal Reserve in a few months. analysts have mixed opinions about Bernanke's efforts.

    President Obama praised Ben Bernanke during a recent television interview, but did not really answer when asked if Bernanke will be reappointed as chairman of the Federal Reserve.  Bernanke's second four-year term ends in January.  

    Critics say Bernanke underestimated the seriousness of the housing problem at the beginning of the financial crisis.  But an economist who has wide experience in Washington and on Wall Street, Herbert Kaufman, says Bernanke eventually got it right.  

    "I think he has handled this as well as anybody could have.  He has handled it with great skill and great tact.  And with as much communication and clarity as has been seen at the Fed,” Kaufman said.  
     
    Kaufman is affiliated with the W. P. Carey School of Business at Arizona State University

    Michael Cox of Southern Methodist University in Texas has a very different opinion.  He says Bernanke's efforts to stimulate the economy with record-low interest rates are unsustainable.

    "They are creating a bubble.  The bubble is likely to be pricked [break] as soon as interest rates start to go back up.  And when that happens, all the good results of his policy are going to reverse," Cox said.  

    Cox was previously chief economist for the Federal Reserve Bank of Dallas.  

    Besides low short-term interest rates, the stimulus effort includes $85 billion a month in securities purchases, a complex program intended to keep longer term rates low.

    Low borrowing costs make it easier for businesses to finance new equipment and factories and hire new people.  But if stimulus efforts continue for too long, they could trigger inflation. 

    Stimulus efforts have helped the stock market recover from the financial crisis, and investors became nervous when Bernanke told a congressional committee that the Fed might scale back the program over the next few months.

    "We are trying to make an assessment of whether or not we have seen real and sustainable progress in the labor market outlook.  And this is a judgment the committee will have to make," Bernanke said.

    That was back in March, and Bernanke said he will not cut the stimulus unless inflation worsens or the unemployment situation improves.  

    A new survey of financial managers at companies across the nation shows that more than one-third want the Fed to keep working to boost hiring, while others are concerned about inflation.

    A member of the American Institute of CPAs, Jim Blake, says what the economy needs the most right now is a steady hand.

    "So steady as you go is really what I’m looking for.  Somebody that isn’t going to jump in and jump out of different policies," Blake said.

    Blake is CFO of an entertainment company called Morey’s Piers & Beachfront Waterparks.

    Bernanke will wrap up two days of consultations with other top officials of the central bank Wednesday afternoon.  He then is set to meet with journalists and face questions about the state of the economy, efforts to improve it, and whether he will continue as Fed chairman.

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