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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.
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