Circular firing squad department

So now Russ Feingold and Barbara Boxer have announced that they will not support Ben Bernanke's reappointment as chair of the Federal Reserve, putting his reappointment in jeopardy. No good can come out of this, none at all.

Bernanke screwed up during the bubble years but has since then performed heroically. He has ticked people off by being coy about the Fed's future stimulus efforts - maybe the Fed will keep rates low as the economy recovers, maybe it'll start raising rates this year when the economy heats up. The possibility that the Fed would tighten significantly before we get a meaningful recovery is a real concern. And maybe Bernanke has been too cozy with banks.

But Bernanke is not the problem here, it's the Fed as an institution and the hypersensitivity of financial markets to every utterance that comes from the Fed. Any plausible candidate for the job will be equally reticent about keeping the spigots open while the economy recovers. You simply cannot be taken seriously at the Fed or in the financial markets if you take a relaxed attitude toward inflation.

What are the upsides and downsides of appointment someone else to take Bernanke's place? On the upside, you might get a guy who is marginally more willing to keep interest rates low than Bernanke. Maybe he (more likely she - Sheila Bair at FDIC is probably on Democrats' short list) may take a slightly tougher line as bank regulator. But the upside seems pretty modest to me.

The downside, on the other hand -- hoo boy! I do not want to see the Dow fall 500 points on concerns about leadership at the Fed or the Fed's independence from Congress. I do not want to see bond yields jump a hundred basis points. I do not want to see the dollar plunge in foreign currency markets. I do not want everyone in the world wondering why the hell they put Democrats in charge of running the country.

Just confirm Bernanke, for God's sake.