Most Popular ArticlesWell, Better Late than Never
Advisors Capital
John Petrides
February 1, 2010
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Congress got it right this time by reconfirming Ben Bernanke as Chairman of the Federal Reserve, but did it in an unnecessarily painful way. In what should have been a fairly easy vote, some members of Congress delivered fear into the markets by posturing on their decision, only to reverse course and do the smart thing by reappointing Bernanke; the markets had a right to be concerned.
Congress has not convinced many that it knows what it is doing with regards to helping the US economy. Remember TARP? Congress voted against the first version of the bill (interestingly right before the 2008 elections, only to vote in favor of it after the elections were over) and the equity markets dropped rapidly. What about healthcare reform? Although still not passed, the process has been a disaster from the outset, with the American public still not really knowing the true terms of the bill. So the markets had a right to be jittery if Congress did not reconfirm Chairman Bernanke, who is one of the most respected central bankers in the world.
Over the past two years, Bernanke has done an admirable job in the face of the abyss of the financial crisis that not many could replicate. Lowering interest rates to near 0% levels and instituting a mortgage-backed purchase program, have been critical in opening the credit markets and resuscitating the US economy, which has now posted two consecutive quarters of positive GDP growth. The economy is mending and in my opinion, removing Bernanke at this point of the cycle would have proven to be an utter disaster for not only the US, but the global economy, as it would have created more uncertainty in the markets. Investors must stay focused on the fact that underlying fundamentals of the economy and corporate earnings are improving, but mindful of Washington playing aggressive politics over effective policy.
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