As Paul Krugman argues today, the inaction of the Federal Reserve in the face of our economic problems is a bit puzzling because Ben Bernanke is closely associated with the view that aggressive action is possible in this kind of situation. Consequently, it’s not really clear why so little is being done.
At least one possibility, however, is that Bernanke’s own views aren’t the same as those of the median member of the Fed’s Open Market Committee. If that’s true, then good news may be on the way since on Thursday the Senate Banking Committee is finally going to hold hearings on Barack Obama’s nominees for the Fed’s Board of Governors. It’s been frustrating to me to watch the Senate slow-walk this, and equally frustrating to see the administration make no effort to get them to do otherwise. Even more frustrating, there’s been very little scrutiny of what Sarah Bloom Raskin and Peter Diamond actually think about this subject (Janet Yellen is more of a known quantity). My hope is that their confirmation could be the impetus for the change we need, but at this point that’s really just a hope.