This morning another new poll has former Speaker Newt Gingrich leading nationally in the race for the GOP nomination (it’s on page 8 of this link).
Among the promises Gingrich routinely makes of things he would do as president, promises to fire Federal Reserve Board Chair Ben Bernanke, to whom Gingrich assigns substantial blame for the economic meltdown and the failure of the economy to bounce back more strongly. He likes the term “disastrous” to describe Bernanke’s performance and says that Bernanke is the “first person” who needs to be fired.
(Those are from this debate, in which Bernanke is mentioned 11 times.)
Herman Cain also says he would fire Bernanke. Rick Perry has suggested that Benanke’s actions border on “treason” and that Bernanke would be “treated pretty ugly” in Texas if he continues to “print money.” Ron Paul wants to do away with the Fed entirely. Mitt Romney has managed to skate by without a clear statement on “firing” Bernanke, saying he “wouldn’t keep Ben Bernanke in office,” and would “choose someone of my own,” which might mean he would make the change when Bernanke’s current term expires in 2014.
I have no strong opinion about Bernanke’s record or his competence, but I have wondered whether presidents are really authorized to fire the Fed chair, because I have so often heard it described as an “independent” agency, and the chairmanship (unlike, for example, cabinet members) serves for a fixed four-year term which does not coincide with the presidential term. Bernanke, a Princeton economist, was serving as chair of President George W. Bush’s Council of Economic Advisers in 2006 when Bush named him (and the Senate confirmed him unanimously) to chair the Fed. Obama nominated Bernanke for a second term in 2010, and he was confirmed but this time there were 30 no votes, the highest ever for a Fed chair nominee.
I turned for guidance to St. John’s/St. Ben’s economist Louis Johnston (who also writes an economic column for MinnPost). Johnston told me that no Fed chair has ever been fired by the president.
The Federal Reserve Act establishes both 14-year terms for members of the board and four-year terms for the chair and adds: “each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President.”
It’s not clear what that “for cause” language might mean. It’s never been tested. It implies to me that the president is supposed to have some “cause” other than disagreement over monetary policy, although it’s not really clear, hasn’t been tested, and I almost can’t imagine a Fed chair fighting to stay in office if a president was trying to dump him. But bear in mind, the president doesn’t need to establish a “cause” to fire most of his appointees, and the language is probably intended to underscore that the Fed chair is different from, let’s say, a cabinet member.
Johnston said it sounds like the president can, at least technically, remove a fed chair under this language but he added:
“My guess is that firing the Fed chair would provoke big gyrations in the financial markets. Central bank independence has, for better or worse, become the norm throughout the world and an attempt by the president to fire the chair would certainly be perceived as a threat to the Fed’s independence.”
I have asked Team Gingrich for a response to the question of Gingrich shares the concern over Fed independence or the impact on the markets of a Fed chair firing, but I haven’t heard back yet. If I receive a reply, I’ll pass it along.
So, there is no specific constitutional prohibition against the president dismissing the Fed chair IF he can show cause.
On the other hand, there is also no history (that ugly word) of any president actually doing it.
So, Gingrinch (as president) could certainly take the action, but might provoke some sort of reaction from congress, and possibly a court case if someone could show damage and thus status to bring a suit, which would probably wind up in the supremes.
As to the financial markets, they gyrate enough without any help…. that’s a minor factor.
There is no shortage of “cause” in this instance–years of public exhibitions of cluelessness related to the oncoming economic collapse.
See:
http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/reform-good-firing-bernanke-better/
And:
http://www.cepr.net/index.php/bernanke-greatest-hits
Remeber “Heckuva job, Brownie!”?
Well what would the $%#$storm be if “Brownie” had been warned for 3 or 4 years of the coming debacle?
What if months after the hurricane hit “Brownie” denied it had been more than a little bit of wind?
I, and many others, would contend that this is a failure several magnitudes greater than “Brownie” and Katrina.
So yes, there is “cause” for firing.
I thought this had been settled a long time ago. Congress impeached and tried President Andrew Johnson for firing a cabinet member in violation of the law. He was acquitted and the Supreme Court ruled in a later case that Congress does not have the authority to prevent the President from firing his appointees. In that case it was a postmaster, but I don’t know why the Federal Reserve Chair would be any different.
The word Gingrich and president will never officially be used in the same sentence. Gingrich will shortly be enveloped in his own political baggage that follows him. The press questioning will be relentless. Hypocrite is written all over Newt’s past. Gingrich is nothing more than a full-time opportunist with a flawed character. He is the current flavor of the month for the republicans. The republicans are nearly out of characters to put forth so they are in a very tight corner and have no way out. Their stance of yesterday they were for it and today they are against it has left them without an identifiable core from which to run their campaigns. Thank you tea party for taking down the republican party with your nonsense. Politics are like a pendulum. It swings hard left and it swings hard right. Politics are best when the pendulum is in the middle. Right now the republican pendulum is all the way past hard right, all the way to stupid.
It’s the Fed’s supposed independent, nonpolitical status, as exemplified by fixed term appointments. I don’t believe that Bernanke is considered a member of the President’s cabinet.
It’s a bit like the appointment of a Supreme Court judge; something that the President does but cannot undo.
Bernanke hid billions in loans to bailout foreign banks with TARP money.
Whoever the GOP president is will fire Bernanke but will not prosecute him as he should.
If the Chair holds his position for a term subject to dismissal by the President for cause, he might also have a right to notice of the grounds and a right to a hearing. Public employment is considered a form of property and a person cannot be deprived of property without due process of law. There might also be some limits on what the President could do under the First Amendment.
“For cause” would have to be something like the misfeasance, malfeasance or nonfeasance that in effect violated his duties as a public official.
Personally, I agree with Gingrich but i don’t know why he’d just fire the guy. There needs to be multiple grand juries investigating what happened in 2008 and handing down indictments left and right. I’d investigate Alan Greenspan too. This country will never get back on its feet unless those who instigated the 2008 meltdown and profited by it are prosecuted and brought to justice.
“Whoever the GOP president is…” – You could try clicking your heels together and thinking “there’s no place like home” if it makes you feel better, Dennis. Either way, I wouldn’t measure the Oval Office for new drapes quite yet.
Malfeasance:…any act that is criminal or that is wrongful and gives rise to the injury of another person….
Misfeasance:…breaching the duty of care by improperly performing a legal act which resulted in harm….
Nonfeasance:…a failure to act that results in harm to another party…
Hmmmm, seems to me that there is plenty o’cause in those 3 words re Bernanke.
By the way, how has Bernanke done on that dual mandate (stable prices and full employment)?
The recent story on Gingrich accepting over a million dollars in essentially unearned consulting fees from Frannie and Freddie should make Newt the poster child for the culture of corruption in Washington. He is not in a position to throw stones.
I think that Bernanke is naive, not corrupt. I believe that Bernanke trusted the investment bankers to fix the system with his help. Hopefully, he had learned that the investment bankers cannot be trusted.
There is a direct and obvious conflict between Mr. Gingrich’s argument that Fed policy hasn’t helped and that Fed policy is likely to bring down the dollar and encourage borrowing.
The Fed is stuck in a bit of a Catch-22. They’re supposed to be independent, and an independent central bank does what’s appropriate, damn the politicians. The Fed is therefore only independent to the extent that it placates the politicians so that they don’t revoke its independence.
Neal–
I think that you would have to prove intent and causation to substantiate a criminal act.
Merely to state that bad things happened on his watch is not enough.