Of course, the most straightforward path to energizing the Fed isn’t adding two new members to its Board of Governors, but replacing its chairman. And the White House had an opportunity to do so in 2010, when Ben Bernanke’s term expired. Instead, Obama chose to renominate Bernanke. The thinking was that Bernanke had pursued an extraordinary set of activist policies during the worst of the crisis—he probably deserves more credit than any single person for preventing a second Great Depression—and he was respected in the institution and by the markets. Reappointing him would thus help with confidence and ensure that the White House had an able partner if the economy turned south again.
But Bernanke has been much more cautious in accelerating the recovery than he was in combating the initial crisis. When the financial markets were collapsing, he went far beyond the traditional limits of the Fed to support the financial markets, purchase depressed assets, and inject liquidity directly into the banking system. But he has not been nearly as aggressive in his efforts to support the recovery. The second round of quantitative easing could have been much bigger. The Fed’s commitment to employment—even at the cost of modest inflation—could have been communicated directly to the markets. Unorthodox policies, such as targeting a specific level of nominal GDP growth, have been left untried.
At this point, even quite mainstream voices have come to worry over Bernanke’s apparent timidity. In September, Charles Evans, the president of the Chicago Federal Reserve, gave a pointed speech in which he asked:
Imagine that inflation was running at 5 percent against our inflation objective of 2 percent. Is there a doubt that any central banker worth their salt would be reacting strongly to fight this high inflation rate? No, there isn’t any doubt. They would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market.
This raises the question of whether the Obama administration made a mistake in reappointing Bernanke. If it had managed to install a more activist chairman at the Federal Reserve, then its inaction might have been more effectively offset by the Fed’s actions.
As it is, both major channels for economic change are clogged, and there appears to be little immediate hope of unblocking them. The president is but one actor in the drama of American politics, and he is quite constrained in his capacity to make—or remake—American policy.
The mass media rarely mentions that, but nor do most presidents. Indeed, the greatest confidence man of the last few years, at least going by Suskind’s definition, was not Larry Summers or Timothy Geithner, but Barack Obama. Being a confidence man is almost in the job description of the insurgent presidential candidate. Having not been president before, you must, by definition, ask the American people for a trust you have not earned.
And Obama was better at this than most. He gave America hope. He made America believe he could deliver change. And, by the standards of Washington, he has probably done more than anyone could rightly have expected. Stimulus, health care reform, the end of “don’t ask, don’t tell,” the creation of the Consumer Financial Protection Bureau, the Lily Ledbetter Fair Pay Act, the payroll tax cut, new tobacco regulation—this is much more than your average first-term president achieves. But by the standards of the speeches and spirit that animated Obama’s campaign, he has not done nearly enough.
At the end of the book, Suskind is sitting in the White House with Obama. “Leadership in this office is not a matter of you being confident,” the President reflects. “Leadership in this office is a matter of helping the American people feel confident.”
But the president needs to do more than lead. He needs to govern. And when he has so convinced the American people of his leadership that their expectations for his term far exceed his—or anyone’s—capacity to govern, disappointment results. That’s when they go looking for another confidence man—one whose promises aren’t sullied by the compromises and concession made in the effort to deliver results—and the cycle begins anew.