President Obama's reappointment of Ben Bernanke to head the Fed is a very shortsighted decision, says Morgan Stanley Asia head Stephen Roach.
"While America's head central banker deserves credit for being creative and courageous in orchestrating an unusually aggressive monetary easing program, it is important to remember that his pre-crisis actions played an equally critical role in setting the stage for the most wrenching recession since the 1930s," Roach writes in the Financial Times.
"It is as if a doctor guilty of malpractice is being given credit for inventing a miracle cure. Maybe the patient needs a new doctor."
Bernanke made three philosophically driven critical mistakes, Roach says: failing to pre-empt the housing bubble, blaming Asian economies for U.S. economic troubles, and being “cut from the same market Libertarian cloth that got the Fed into this mess.”
“It would be the height of folly to reward Mr. Bernanke for the recovery that never stuck,” Roach says.
“Yet Mr. Bernanke’s apparent reward is, unfortunately, typical of the snap judgments that guide Washington decision-making.”
Moreover, no one knows for certain if the Fed’s strategy will succeed.
Most traders and analysts hailed Bernanke’s reappointment as providing stability, eliminating one risk factor that could have weighed on the market as the end of his current term drew closer.
"I think the market is comfortable with Bernanke and trusts Bernanke," Keith Springer, president of Capital Financial Advisory Services told The Wall Street Journal.
"It's probably already factored in.”
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