Fed Chairman Ben Bernanke was confirmed for a second term today in the Senate, albeit by a relatively thin margin: 70-30. That’s reportedly the “thinnest approval ever extended to a chairman in the central bank’s 96-year history.” Just a few days ago there was some question as to whether he would survive the populist political backlash that threatened to vote him out of his position as head of the central bank.
For the moment, Bernanke has won. The question is whether his victory will turn Pyrrhic. At least expectations are uncomplicated:
“Now that the Senate has confirmed him for a second term as chairman of the Federal Reserve, Ben Bernanke has, or ought to have, a very simple agenda: improve confidence,” writes Newsweek’s Robert Samuelson. “That isn’t his job alone, of course. President Obama and Treasury Secretary Timothy Geithner are hardly bit players. But what Bernanke does and says—how he projects himself and the Fed—matters a great deal, and he faces an exacting challenge.”

Professor John Cochrane offers his take on the financial crisis of 2008 in the current issue of the Cato Institute’s Regulation.
His basic argument: “the signature event of this financial crisis was the ‘run,’ ‘panic,’ ‘flight to quality,’ or whatever you choose to call it, that started in late September of 2008 and receded over the winter. Short-term credit dried up, including the normally straightforward repurchase agreement, inter-bank lending, and commercial papermarkets. If that panic had not occurred, it is likely that any economic contraction following the housing bust would have been no worse than the mild 2001 recession that followed the dot-com bust.”
Was that really the source of the crisis? Maybe, although no one really knows. This is economics, after all. Certainly there’s no shortage of competing notions of about what happened. But even if you don’t agree with Cocgrane 100%, he makes a number of salient points that, at the very least, demand consideration in the months and years ahead as the powers in Washington attempt to “fix” the system.

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Last week we considered the possibility that the declining trend in new jobless claims had run its course. Today’s update on new filings for jobless benefits offers a reprieve from that ominous possibility. The reprieve may be temporary, of course, but for today at least it appears as though the nearly year-long decline in new filings remains intact–weak but intact.

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