The Kroog For Helicopter Ben's Job

Baseline Scenario's Simon Johnson argues not only does Helicopter Ben need to be replaced, but that he needs to be replaced with Paul Krugman.

Big banks, without doubt, would be appalled.  But the “Greenspan fallacy” was always that no one else could do his job and even considering an alternative would be destabilizing.  Look at the mess that got us into.

What the markets really care about is what the Fed does, with regard to both interest rates and regulation.  What we need is a Fed chair who can be trusted to nuture the recovery  – find me the business person who is opposed to that - without allowing too big to fail institutions to remain so big and so dangerous that they can destabilize the system.

And don’t think that Krugman can’t raise interest rates if he really sees inflation coming – even if the danger, for example, is not picked up by conventional measures.  He is tough minded, not afraid to take stands long before they are fashionable, and confident that others will soon come to their senses.

Would he be a “populist” choice?  Absolutely not.  He would be a popular choice, no doubt, but he is also many technocrats’ favorite thinker and a person whose credentials and proven policy opinions speak for themselves.  No one would question the independence of the Fed with him at the helm.

Would Krugman be opposed by the Republicans?  Yes, potentially.  And there could be quite a fight in the Senate – entirely of the Republicans making.  But if they oppose his appointment – despite his qualifications and in the face of our weak economy – what signal would that send about their priorities?

The president said on Thursday he is (finally) willing to fight the big banks.  He’s an effective fighter and, with enough support, he can win.  But is any part of his agenda at this point really advanced by winning the reappointment of Ben Bernanke?

I'd rather see The Kroog in there than Helicopter Ben, that's for damn sure.  No doubt about it.  Is Paul Krugman the best choice?  I'd argue for Nouriel Roubini, but you know what?  Kroog would still be a couple light years ahead of ol' Ben there.  Now's the perfect time for Obama to extend the Volcker Rules and clean house.

Oh, and Timmy's ass is next.