Obama Is Likely Getting the Monetary Policy He Wants

President Barack Obama shakes hands with Ben Bernanke after signing the Dodd-Frank Wall Street Reform and Consumer Protection Act at the Ronald Reagan Building in Washington, D.C. on July 21, 2010

Photograph by Saul Loeb/AFP/Getty Images.

John Cassidy says that, in retrospect, reappointing Ben Bernanke looks to have been the Obama administration’s biggest mistake. That’s certainly what I think. An interesting further nuance is provided by his very last line, which says “I’d bet that right about now the president is wishing he’d made a different choice.”

What’s interesting is that my read of the situation is that Obama doesn’t wish this, even though he ought to. The key evidence is that Bernanke is hardly the only member of the Federal Reserve’s Open Market Committee who Obama has appointed, and none of his appointees are calling for monetary expansion. Instead the strongest voices at the Fed for expansionary policy are regional bank presidents—Charles Evans of Chicago has been the champion, followed by Eric Rosengren of Boston and John Williams of San Francisco. The leading voices for aggressively contractionary policy have also come from the regional banks (especially Dallas with sporadic St. Louis, Kansas City, Richmond, Philadelphia, and Minneapolis discontent). The Board of Governors in D.C. (along with Sandra Pianalto of the Cleveland Fed) has been very consistently in line with Bernanke’s approach. In other words, it’s not as if Bernanke is some kind of outlier who Obama misestimated when he appointed him. Nor does it really make sense to think that Obama and Bernanke both secretly want expansionary policy but are being held back by timidity among other FOMC members. Elizabeth Duke is the only Bush holdover on the Board of Governors.

This is a Fed full of Obama appointees pursuing a disastrous policy trajectory that’s creating all kinds of problems for Obama. But I’ve never read any reporting indicating that the Obama economic team is upset about monetary policy, I’ve never heard any discontent with monetary policy from administration officials on or off the recod, and Obama’s allies on Capitol Hill have basically never called publicly or privately for more expansionary monetary policy. Rather than someting as simple as an error, there seems to be a totally comprehensive systematic  blunder in which Democrats simply ignore the most powerful tool for bolstering aggregate demand while Republicans call for a disastrous tight money agenda.