Examples of Bernanke's ineptitude? There are plenty. Fortune published a nice little timeline of his blunders during the financial crisis that shows that Bernanke should have resigned as early as fall 2008. But, clearly, this Fed chairman has incredible hubris:
March 2007: Saying subprime was contained. Bernanke will never live down his remark to Congress that "the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained." The damage to Bernanke's reputation, by contrast, has turned out to be almost unlimited.
July 2008: Claiming Fannie and Freddie were fine. This comment is largely forgotten because Bernanke made it the same week Hank Paulson blurted out that what he really needed to solve the Fannie-Freddie problem was, um, a bazooka. Bernanke was never quite that much of a bozo, but his remark does portray him in his natural habitat, denial. "The GSEs are adequately capitalized," Bernanke told the House Financial Services Committee. "They are in no danger of failing." Actually they were, as taxpayers have learned the hard way to the tune of $163 billion.
September 2008: Changing his story on Lehman. Many commentators say letting Lehman Brothers fail was a catastrophic error. But that wasn't actually the biggest misstep here. Something was going to crack at some point in the crisis, no matter how many firms the Fed rescued. "Whether Lehman itself got saved or not . . . the crisis would have unfolded along a different path, but it probably would have unfolded," JPMorgan Chase (JPM) chief Jamie Dimon told the Financial Crisis Inquiry Commission (see page 370).
So letting Lehman fail is a defensible position. But Bernanke didn't defend it -- not consistently, at least. He could have hammered at the huge hole on Lehman's balance sheet and the Fed's desire to lend only prudently. Instead, he claimed inexplicably that the market had had time to prepare for a Lehman filing, which only confused the issue and made it sound like he was making excuses. Which, come to think of it, he was.
March 2009: Dodging and weaving on AIG. Bernanke didn't do himself any favors by pledging to run a more transparent central bank, then backpedaling on cries for exposure of the parties that got taxpayer funds when the Fed rescued AIG (AIG). Bernanke's lieutenant Don Kohn even told the Senate that showing where the money went could "undermine confidence" in the financial system. That argument suddenly went out the window about a week later, which didn't exactly add to anyone's confidence in the Fed.
Here's Bernanke claiming all is well in Mudville before, while, and even after the shit hit the fan:
Back then, whenever I heard Bernanke speak, I thought about that scene from the Naked Gun in which Leslie Nielsen's character claims that there is "nothing to see here" as the fireworks store is exploding:
But Bernanke kept his job after the financial crisis and continues to wield his incredibly destructive power. Lest we forget that Fed economists and the president of the Philly Fed have predicted that Bernanke's liquidity-pumping policies will end in disaster. The last sane Fed chairman, Paul Volcker, has also made a dire warning regarding Bernanke's reckless policies. And Roubini warns than the Fed is inflating an asset bubble EVEN LARGER THAN THE FIRST HOUSING BUBBLE. Yet, despite his pitiful performance during the financial crisis and despite the fact that credible economists question Bernanke's competence, Chairman Ben keeps the most important job in the world. How is this possible?
Ben Bernanke is South Carolina's greatest shame. That's saying a lot considering this state's storied history. It's way past time to send him packing. Unless Bernanke resigns (and he clearly won't), he'll be up for reappointment in 2014. Dollars to donuts Obama reappoints him. After all, money printing and liquidity pumping enable deficit spending.