the greatest depression

The Rise of Ben Bernanke

The best politician in Washington isn’t an elected official. It’s Federal Reserve chairman Ben Bernanke.

Bernanke just miraculously won reappointment to another four-year term with five months left on his current one — during which time many people had expected Larry Summers to pick up political steam to take control of a bigger, more powerful Fed.

In part, Bernanke was in the right place at the right time. His reappointment coincided with new federal estimates of a $9 trillion budget deficit, as Slate’s Daniel Gross pointed out. This week also marks the largest sale of Treasury securities in history in order to finance the bailouts, noted prolific financial tweeter Conrad Bessemer. Bernanke’s reappointment provides a shot of stability.

But he has also demonstrated great political artistry since the height of the financial crisis. Like the president, Bernanke’s academic detachment and knack for appearing like the least-threatening beta male in the room is perfectly suited to a time when any show of testosterone is quickly punished. He has survived several congressional panels questioning the bailouts, and lacks the obvious character flaws that undermined his peers. Former Treasury secretary Hank Paulson was too Wall Street–y, too bossy, and too Goldman Sachs–connected; current Treasury secretary Tim Geithner is a career bureaucrat who seems more comfortable behind the scenes; Obama economic adviser Larry Summers is famously short-tempered, made his fortune at a hedge fund, and can’t make his brilliance palatable.

Bernanke, on the other hand, walks between raindrops. He has his faults: He headed the Fed when Wall Street cowboys ran rampant over the markets in 2006 and 2007. He has made the Federal Reserve the single biggest buyer of weak securities bundling troubled Fannie Mae and Freddie Mac loans, to the tune of $1.25 trillion. He has kept the federal interest rate at 0 percent, which discourages consumers from saving money and is basically a free handout to banks that make far more interest on loans than they have to pay. But Bernanke still gets to wear the hero cap, mainly because he just somehow doesn’t seem like a bad guy.

Bernanke cultivates the right people. Last fall he courted Obama’s favor even before the election by endorsing the Democratic version of fiscal stimulus. His appearance in Martha’s Vineyard — tieless, in imitation of the president — showed his keen eye for mirroring the men whose support he needs most. The image recalled Bernanke’s congressional appearance last fall with Tim Geithner, both officials wearing the same tie like superhero TARP Twins.

Bernanke also draws contrasts where useful, and his loyalties are malleable. He faced down Congress with some defiance; he doesn’t and won’t need them. He managed to leave Hank Paulson holding the bag for the unpopular bailout program, even though only the Fed chairman has the power to dole out trillions in government dollars. When the two men testified before Congress about Bank of America’s acquisition of Merrill Lynch, Paulson was forced to back down from his claim that he’d only strong-armed Lewis at Bernanke’s command (perhaps Bernanke’s ten days of preparation before testimony helped). And in February he backed deftly away from the flailing Tim Geithner, quipping that the pair were “not married, just good friends.” Recently, Bernanke and Geithner scuffled over whether the Fed should get more regulatory power. That struggle still hasn’t been resolved, but only Geithner is getting grief for it; his quickly publicized, out-of-character profane tirade against Bernanke and two others lost him some friends and was openly mocked by members of Congress.

They say that in academia, from whence Bernanke hails, the battles are so vicious because the stakes are so small. Bernanke has shown he can fight hard when the stakes are very, very big.

The Rise of Ben Bernanke