Did Ben Bernanke's Federal Reserve save the U.S. from a worse financial panic in the 2008 finanical freeze, as this Bloomberg LP column claims? Do Bernanke's the cheap-money and aggressive bond-buying policies, likely to continue under Janet Yellen, President Obama's pick to replace him, threaten to slow long-term recovery? And do in-house critics Philadelphia Federal Reserve President Charles Plosser, who in speeches and occasional votes challenges government attempts to stimulate hiring and questions the ad hoc and aggressive nature of the Fed's interest rate easing policies, doing his job enriching the national discussion? Is he representing his Philadelphia-based district? See my column in Sunday's Inquirer, or read excerpts below (see also my earlier column here):
A few weeks ago, just after the Federal Reserve let him back onto its policy-setting Open Market Committee (he rotates on and off), Philadelphia's Federal Reserve Bank president, Charles I. Plosser, got investors' attentionwhen he told a crowd of economists that the Fed might be forced to raise interest rates rapidly to unwind lame-duck chairman Ben Bernanke's cheap-money policy.
According to Reuters, Plosser went on to take a shot at Janet Yellen, who will replace Bernanke next month, when he dissed the kind of cyclical mathematical modeling favored by Yellen as a basis for rate targeting and other economic policy.
By current Fed standards, Plosser is a conservative ideologue: He is skeptical that the central bank can execute its congressional mandate to control unemployment by applying monetary policy on a long-term basis. He has voted against Bernanke-led measures to boost the Fed's holdings of mortgage bonds and other arcane financial creatures. Plosser prefers good old Treasury bills.
Plosser also said the 2008 recession, which provoked all that "aggressive" Fed reaction, had whacked the U.S. economy with "a permanent hit to the output level."