Nine Questions for Ben Bernanke

I'm not a fan of the monetary or regulatory policies advocated by the Federal Reserve. I think Alan Greenspan was a crook; although unlike the politicians and corporate yes-men he served, he never claimed he wasn't. Nassim Taleb has called for Bernake's head, as have persons on both the right and left; although for quite different reasons. It is clear that Mr. Bernanke will be confirmed without undue problem, just as Greenspan was. If the Democrats were serious (which it doesn't appear to be) or at least a few outliers, like Representatives Ron Paul (R-TX) or Gary Ackerman (D-NY), who do sit on the House Financial Services Committee were able to ask the right questions, then we might actually understand where this listing ship will finally sink.

Elliot Spitzer, former Governor of NY, has listed some decisively intelligent questions that should be asked of Mr. Bernanke when he's subjected to appointment. They are:

1. How does the Fed define economic success? If the Fed is to be the macro giant that it seeks to be, we must understand whether its metrics for success focus on GDP growth, job growth, household median income growth, inflation moderation, or some other data.

2. What industrial policy does the Fed see best fitting our macro goals?

3. How do we define and measure systemic risk? If the Fed wishes to be granted the authority to be the regulator of risk, it better be able to explain how it measures it.

4. Has the Fed found the analytical error that permitted it to believe throughout 2008 that the crisis was contained and would not jump from the sub-prime sector to the entire financial system? If we cannot locate that analytical error, how can we possibly begin to spot systemic risk in the future?

5. Has the Fed examined why it permitted the avalanche of debt to course though the financial system without one of its own analysts observing that the risk of default was not reflected in the market's pricing of risk?

6. What bank structure will best accomplish the macro goals the Fed defines? Do we desire a market dominated by several institutions that are openly "TBTF"—too big to fail—or are we going to reverse the implicit and explicit federal guarantees of the past year and cut loose the major institutions? And if we are to cut them loose, how will the market be persuaded that they really are on their own, and the Fed will not rescue them next time, too?

7. Does the Fed stand by the notion that asset bubbles are better dealt with after the fact than during their creation? Does this view, which the chairman has articulated with some frequency, doom us to the incessant cycles we have lived through over the past decade?

8. Does the Fed still have faith in "self-regulation," the concept that was used to justify the decay that set in throughout the regulatory apparatus in Washington?

9. What governance structure is appropriate for the Fed, given its new authority?