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The Bearded One has stepped into the minefield and, apparently, endorsed Obama. Or at least, the Democrats’ stimulus idea. Perhaps Ben just wants four more years as Fed Chair. Is Princeton that bad?

While the Fed chief said any stimulus should be "well targeted," even a general endorsement amounts to a political green light. Mr. Bernanke certainly knows that Mr. Obama and Democrats on Capitol Hill are talking about some $300 billion in new "stimulus" spending, while President Bush and Republicans are resisting. And by saying any help should "limit longer-term effects" on the federal deficit, he had to know he was reinforcing Democratic opposition to permanent tax cuts.

That probably wasn’t a smart move, and I seem to recall Bernanke saying he would try to avoid such actions. One of my complaints about Alan Greenspan was the way he injected himself into policy debates. Still, I don’t see any reason why the Fed Chair can’t give his opinion on fiscal matters.

On an interesting side note, Monica Langley points out in today’s WSJ that Obama is now BFF with 81-year-old Paul Volcker.

On Tuesday, Mr. Volcker is scheduled to appear on the campaign trail with Sen. Obama for the first time. At a round-table discussion with voters in Lake Worth, Fla., he'll "give his view on the state of the economy and the credit markets, and what needs to be done to fix them," says one campaign adviser. Longtime Fed watchers are amused that Mr. Volcker, known for his muttered statements during Fed meetings in the 1980s, will be in a political role on the stump.

For Mr. Volcker, a connection with Sen. Obama could help burnish his record as Fed chairman. The cigar-chomping central banker from 1979 to 1987, he received blame for driving up interest rates and tipping the U.S. into the deepest recession since the Great Depression. But Mr. Volcker is just as well known for taming the runaway inflation of that era. His stock has risen in recent months as his gruff warnings about the risks of deregulating the financial sector have come to look prescient. His successor's reputation, meanwhile, has come under a cloud. Alan Greenspan is under criticism that the low interest rates and deregulatory ideology of his tenure contributed to today's crisis.

Posted by edelfenbein at October 21, 2008 9:52 AM