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Monday, January 25, 2010

The politics of Bernanke

Scenarios:

1. Bernanke reaches 60 plus votes across party lines, no filibuster. Victory for the President, kind of, since supporting him is already a sign of being with the banks. Victory for Senate Republicans, who get to say they are bipartisan on everything but matters of principle, like healthcare.

2. Bernanke is filibustered, Republicans provide the critical votes to get him past 60. Pyrrhic victory for the President, victory for Senate Republicans, whether or not they backed his renomination.

3. Bernanke is filibustered by Democrats and Republicans together. A defeat for the President on the eve or just after of his attempt to regain control of national debate with the State of the Union. A victory for individual Democrats and Republicans who face re-election or primary challenges in 2010, like Barbara Boxer and John McCain.

4. The President pulls the Bernanke nomination. A defeat for the President, but if he drops Geithner simultaneously in favor of economists who are not seen as Wall Street stooges, this could be huge moment in reshaping of his and the Democratic Party's image. Senate Republicans still win for killing the nomination, but the country wins, not only in terms of better policy outcomes, but because a Fed chair appointed by a Democratic president might be at least somewhat take into account the 2012 political cycle in her decisionmaking.

When you renominate a Bush holdover and Republicans go populist on you for backing him, you've already lost, politically. The President has no winning move here. The best thing to do is to pull the nomination, citing Republican opposition (so that the President comes away looking somewhat bipartisan), and then name someone who won't cause a market crash but a) doesn't look like a Wall Street whore and b) didn't have a hand in causing the 2008 meltdown.

Probabilities: Option 1, 53%. Option 2, 41.9%. Option 3, 5% Option 4: 0.1%

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