Time for a Change at the Fed
Arvamus 26 Jan 2010  EWR
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Larry Kudlow
What exactly did Ben Bernanke promise Senate Democratic leader Harry Reid? That’s the big question right now. Reid reluctantly endorsed Bernanke after a one-on-one meeting. Here’s what Reid said, according to the Las Vegas Sun: “I made it clear that to merit confirmation, chairman Bernanke must redouble his efforts to ensure families can access the credit they need to buy or keep their home, send their children to college, or start a small business.”

So, in a desperate search for votes, is Bernanke going around the Hill making easy-money promises? Even easier money than we have had in the last year? A Wall Street Journal editorial on Monday opposing Bernanke’s nomination is spot on. Monetary quid pro quos will destroy Federal Reserve independence and could generate yet another bubble.

And while Bernanke was right to gun the printing presses in the fall of 2008, he has overstayed his easy-money welcome by at least six months. The emergency has long passed, but the emergency policies continue. Breaking a window between 2002 and 2005 -- when Greenspan and Bernanke kept rates too low for too long (especially negative real interest rates) -- and then fixing that window later on is no way to run a policy.

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