The chairman of the Board of Governors of the Federal Reserve System is the head of the U.S.central banking system. The chairman is the most powerful central banker in the world. Despite often being quoted out of context, the nickname Helicopter Ben stuck. True to the name, he has dropped a record-breaking amount of cash into the economy as he steers the United States through its worst period since the Great Depression. The approximately $4 trillion in loans from the Fed to help struggling financial firms, insurers, automakers and other firms has been credited with keeping the economy afloat. (Learn more in Recession: What Does It Mean To Investors?)
It's a place where legends are built: Paul Volker was credited with ending stagflation in the 1970; Alan Greenspan replaced Volker and served through four presidential administrations, making him the second longest tenured chairman and earning him the nickname "maestro" for his skill at manipulating the economic levers as he navigated his way through some of the greatest booms and busts in history. Ben Bernanke joined the elite ranks of those who have served as chairman on February 1, 2006, when he was appointed by George W. Bush. His first four-year term will come to an end in early 2010. Will it be his last?
With a new president, a horrible economy, staggering unemployment, and Vice President Joe Biden's recent admission that "there was a misreading of just how bad an economy we inherited," many beltway watchers don't think Ben's prospects look particularly good. Add to that the appointment of Tim Geithner as Treasury Secretary, and pundits are suggesting that January 31, 2010 may be the end of the Bernanke era. It would be an inauspicious close to the term of a man President Bush dubbed "the right man to build on the record Alan Greenspan has established."
Bernanke came to office with great fanfare based on his life-long study of the Great Depression and his theories for warding off a recurrence. In this regard, fighting deflation was a topic he had spoken about at length. On November 21, 2002, in his speech titled "Deflation: Making Sure "It" Doesn't Happen Here", Bernanke made reference to a "helicopter drop" of money into the economy.
The Economic Downside
On the downside, Bernanke may be laid low by what is best summarized by Bill Clinton's famous line, "it's the economy stupid." A lingering recession, devastating stock market losses, prolonged high unemployment and prospects for a long, slow recovery don't bode well for a man charged with fostering economic growth and limiting inflation. Bernanke's headline-making role in the strong arm tactics used to get Bank of America to buy the ailing Merrill Lynch business didn't do much for his image or his popularity with legislators.
President Obama's assertion that Bernanke "has done a fine job under very difficult circumstances" was offset by his comment that "all financial regulators didn't do everything that needed to be done to prevent the crisis from happening," and that "the Fed probably performed better than most other regulators prior to the crisis taking place, but I think they'd be the first to acknowledge that, in dealing with systemic risk and anticipating systemic risk, they didn't do everything that needed to be done."
Only Time Will Tell
So what will happen to Ben? On the one hand, a difficult economy may serve as justification for the new president to put his own man in the chairman's seat. On the other hand, the administration claims their policies are working and merely need time to take effect. Changing chairmen would seem to undermine this stance. Only time will tell the current chairman's fate. (Learn more in Ben Bernanke: Background And Philosophy.)
Despite often being quoted out of context, the nickname Helicopter Ben stuck. True to the name, he has dropped a record-breaking amount of cash into the economy as he steers the United States through its worst period since the Great Depression. The approximately $4 trillion in loans from the Fed to help struggling financial firms, insurers, automakers and other firms has been credited with keeping the economy afloat. (Learn more in Recession: What Does It Mean To Investors?)