If, as Jamie Dimon, CEO of JPMorgan, told an investor conference on Monday, the credit crunch really is over, how long before Wall Street canonizes Saint Bernanke?
How the World Works started mulling this question while reading a detailed and generally laudatory Bloomberg article that is half-profile and half-report card on how Bernanke has led the Federal Reserve in tackling the financial crisis.
Opinions, naturally, vary. Former Fed chairman Paul Volcker believes he has overstepped his bounds, while Former Fed vice chairman Alan Blinder gives him an A+: "Paulson and President George W. Bush have done little to address the mortgage crisis ... The Fed has been extremely creative and is fighting this war almost exclusively by itself."
Alan Meltzer, author of a history of the Fed, provides the most damning critique: "We can't have a system that continues to work well if the bankers make the profits and the public, the taxpayers, take the losses ... That is not a viable system."
Future events will further steer the narrative. If inflation spikes while the real economy tanks, Bernanke's aggressive rate cuts and extensions of credit to Wall Street financial firms won't look so good, in retrospect. Likewise, if it turns out that the credit crunch is not over, as some, more gloomy observers are suggesting, the vultures won't be slow in convening to pick over the Fed chair's body. And given that arguments over Greenspan's legacy (best Fed chairman of all time, or bubble-inducing precipitator of the current troubles?), are likely to continue for some time to come, it may be premature to judge Bernanke's performance.
But what we do know is that a crisis occurred and Bernanke took dramatic action; and in the process his public persona went through a remarkable evolution. The same quiet, unassuming economics professor who was widely criticized as naive and bumbling when his dinner-party remarks to CNBC anchorwoman Maria Bartiromo sent stock prices tumbling is now being assessed as the facilitator of the greatest expansion of Federal Reserve authority since the Great Depression. Bloomberg even calls him "now well on his way to becoming the most powerful Fed chairman ever."
That's quite the transformation, and I defy anyone to come up with a Fed-watcher who might have predicted it when Ben Bernanke was chosen by George Bush to succeed Greenspan.
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