The Fed under fire

Worries grow about handing Fed more power

Listen to this article

00:00
00:00

This is an experimental feature. Give us your feedback. Thank you for your feedback.

What do you think?

Never has the old adage about laws and sausages held more true. It is merely too narrow. Seeing the inner workings of crisis-time regulation, bail-outs and the business of central banking is also an unsavoury experience. In a congressional hearing on Bank of America’s acquisition of Merrill Lynch on Thursday, Ben Bernanke, the Federal Reserve chairman, denied threatening to fire BofA’s board, keeping the Securities and Exchange Commission in the dark or trying to delay disclosure of Merrill’s losses.

A complicated situation involving several branches of government and two banks was never going to yield neat, clear answers. Mr Bernanke’s grilling, however, increases worries about handing the Fed more power – particularly in an area as fraught as systemic oversight. Independence in the preserve of monetary policy can, perhaps, remain sacrosanct. But turning the Fed chairman into a political punchbag in games of “he said-she said” clearly risks damaging the institution’s broader standing.

Central banks (and central bankers) are at their best when viewed as dependable, predictable and decidedly boring. The less you hear, as a general rule, the better. A period of crisis, plus repeated public scrubbing of the resulting dirty laundry, however, has thrust the Fed into the centre of a very loud debate.

But Barack Obama should tune out this noise when deciding whether to reappoint Mr Bernanke when his term expires next January. For now, the US central bank deserves his praise. It often led from the front globally in tackling the escalating financial crisis. If Mr Bernanke ends up a one-termer, it should be on the basis of his handling of the economy and that alone. In reality, the consequences of the various moves by the Fed will not be known for years. Before then, the confidence of markets and the public trumps the angst of lawmakers.

E-mail the Lex team confidentially
OR
Post public comments

The Lex column is on Twitter

_________________________________________

Lex is the FT’s agenda-setting column, giving an authoritative view on corporate and financial matters. It is also one of the few parts of FT.com available only to Premium subscribers. This article is provided for free as an example. A Premium subscription gives you unlimited access to all FT content, including all Lex articles and the FT mobile Newsreader.

Subscribe to FT.com

If you have questions or comments, please e-mail help@ft.com or call:

US and Canada: +1 800 628 8088
Asia: +852 2905 5555
UK, Europe and rest of the world: +44 (0)20 7775 6248

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.