Bernanke to chair CEA

For those who missed the White House announcement on Friday 1 April (sic), Fed Governor Ben Bernanke has been nominated to be the new Chairman of the Council of Economic Advisors. (Hat tip to Vox Baby, and to Calculated Risk).

There is a good discussion of the implications at Mark Thoma's Economist's View, who quotes a CNN Money report:

...Bernanke has sometimes been mentioned as a dark horse candidate to succeed Greenspan when he steps down from the Fed in early 2006. Some analysts thought a stint at CEA could burnish Bernanke's credentials for possibly taking the helm at the Fed. But others said the timing might not work out that well because Bush would have to find yet another CEA chairman in a short period of time.

Thoma comments:

The press also seems to have picked up on the fact that this may be a test for the job of Fed chair which is also encouraging as his actions will be interpreted in that light. The potential damage to his reputation if he compromises principle to attain the Fed job is also noted.

I'm not so sure. Greenspan's post finishes in January 2006, only nine month's time. Would it make sense to move Bernanke back to the Federal Reserve after such a short period - and then have to fill the CEA post again? Probably not. I suspect it could be clearing the field for White House favourite Martin Feldstein.

UPDATE: Brad DeLong writes that this "White House personnel decision has increased my trust and confidence in the Bush administration". But Kieran Healy at Crooked Timber takes him to task for what he dubs "pundit fallacy" by hoping Bernanke will in some way defy the White House administration. He writes:

Bernanke certainly seems like a good guy, but the Bush Administration has a way of making sure that the good guys knuckle under.

In the comments on this post Maynard Handley proffers a more cynical reading of the appointment than Brad's:

This is, of course, to test the guy out. If he’s willing to say any BS, fine, he follows Greenspan. And if he remains annoyingly sane, he gets left at the CEA, and pleasantly enough, he’s not at the fed and able to make trouble for Greenspan’s successor, who will, of course, be a bona fide Bush yes man - no pessimistic inflation fighting for him.

Comments

[ChasHeath]

Maybe so.

But you'd think it would be even more disquieting for the markets to lose both Greenspan and Bernanke at the same time. Wouldn't you?