Kicking the Fed
SOMETIMES IT SEEMS as if nobody loves the Fed. At the moment, the hostility emanates mainly from Republicans, who charge that Chairman Ben S. Bernanke's plan to boost the economy through $600 billion in asset purchases will bring on inflation and currency debasement. Senior Republicans are talking seriously of amending the 1977 law that gave the Fed responsibility for maximizing employment as well as stabilizing prices.</br></br>But only 10 months ago progressive Democrats, seeking scapegoats for Republican Scott Brown's win in Massachusetts, were threatening Mr. Bernanke's appointment to another four-year term. Moveon.org charged that "after taking extreme measures to save the banks, Bernanke has shown no interest in helping regular folks who can't find jobs, even though ensuring 'full employment' is explicitly part of his mandate."</br></br>A lot of this is just politics, of course. Perhaps New York Times columnist Paul Krugman is right that the GOP's "real fear is not that Fed actions will be harmful, it is that they might succeed," thus boosting President Obama's reelection chances. But by that logic, Republicans would be entitled to accuse Mr. Bernanke of printing money to reward Mr. Obama for reappointing him or to appease his erstwhile critics on the left.</br></br>We prefer to deal with everyone's arguments on the merits. The fact is that the current debate over the Federal Reserve's policies is inevitable and - at least potentially - healthy.</br></br>Ever since the struggles over Alexander Hamilton's Bank of the United States, populists have feared federal control over the money supply as an instrument of corrupt collaboration between political and financial elites. Given that history, there was bound to be controversy when the Fed began its latest round of "quantitative easing" - after more than a trillion dollars' worth of previous asset purchases and lending to specific Wall Street firms.