The Fed’s December meeting statement is out, and the big news is that the taper is here. More specifically, the FOMC announced it will reduce its asset purchases to $75 billion per month from $85 billion. This was Fed chairman Ben Bernanke’s last scheduled press conference before the Senate votes on the confirmation of his chosen successor, Janet Yellen, who is set to take over February 1. Having served as Fed chief since 2006, Bernanke’s term is effectively over, and it’s now time to consider his legacy.
In the WSJ, Jon Hilsenrath and Victoria McGrane write that “Mr. Bernanke labored to forge consensus even among Fed officials for his complex and untested easy-money policies. He spent much of the past four years wooing support.” Paul Krugman thinks that history will be kind to Bernanke. While “the whole policy community sort of fell down on the job” during parts of Bernanke’s term, he writes, “there wasn’t that much that he could have done differently”.
The FT’s Robin Harding says Bernanke’s place in history rests on one question: “The crisis was and still is agonising for the US and the world – but could anyone have managed it better?” Harding then says, “At present, it seems most likely Mr Bernanke will be regarded as one of a cohort of policy makers who failed to prevent the crisis, but did not actively cause it. The blame for that failure will be widely shared.” Mohamed El-Erian goes further, saying Bernanke weathered the crisis well, but what Janet Yellen does after he leaves will affect how we look back on his post-crisis management.
Christina Romer is not such a fan of recent monetary policy:
Today, I worry that guilt over letting asset prices reach the stratosphere in 2006 and 2007 has made some policymakers irrationally afraid of bubbles. As a result, they focus on the slim chance that another bubble may be brewing, rather than on the problems we know we face—like slow recovery, falling inflation, and hesitancy on the part of firms to borrow and invest…
There are two possible black marks on Bernanke’s record, according to Brad DeLong: first, the decision to let Lehman Brothers fail in late 2008, and second, “the failure to grasp in 2009 that the situation was of the same order of magnitude as that facing Roosevelt in 1933 or Volcker in 1979, and failing to assemble the FOMC behind a policy of ‘regime change’”.
NYU economics professor Mark Gertler, however, sees Bernanke’s role in the crisis somewhat differently: “he was the calming influence — the grownup in the room — during the darkest days of the economic turmoil”.
It also wouldn’t be a discussion of Bernanke without mention of forward guidance. During Bernanke’s term, the Fed has become more transparent about its intentions, and has staked out clear targets for the unemployment rate (6.5%) and inflation (2%).
After seven years covering Bernanke, Neil Irwin (coming through with a killer Bernanke headshot), writes that we still don’t know what the outgoing Fed chair’s legacy will be. Bernanke he writes, “didn’t have the perfect tools for the job, but he searched his academic knowledge of how economies work, and used what he did have to try to put America’s jobless back to work.” — Shane Ferro
On to today’s links:
Trading places
JP Morgan is suing the FDIC for $1 billion - Reuters
Data Points
Between 25-30% of content on the web is copied from somewhere else - Quartz
Listicles
16 times when Ben Bernanke was a total badass - BI
Quotable
NSA official: "I have some reforms for the First Amendment" - Dan Drezner
Primary Sources
The Fed finally tapers its bond-buying program - Federal Reserve
The Fed
The Bernanke Era in two words: Thanks but... - WSJ
5 takeaways from the Bernanke era - WSJ
Regulations
Banks would like traders to restrict market manipulating chats to 1-on-1 venues - Bloomberg
The newest Bloomberg terminal feature: letting clients ban employees from chatrooms - WSJ
Bitcoin
"Our current global [currency] system is pretty crap, but I submit that Bitcoin is worst." - Charlie Stoss
The bitcoin-tulip exchange rate is crashing - Rob Meyer
Felix
Why companies are raising dividends - Reuters
Charts
Renters are largely ignored by Federal housing aid - Center for Budget and Policy Priorities
Year-End Lists
The 41 best stories Businessweek staffers didn't write - Bloomberg Businessweek
Aural Histories
How boomboxes became so complex and awesome - Collectors Weekly
Land of Wonk and Plenty
Bloomberg View's "bloodless kind of centrism" and its struggles to grow - TNR
Data Points
The (SEC) taper is on! The agency is doing less probing and enforcing - WSJ
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