The Status Quo Continues...

Obama renominated Bernanke, so no surprise here:

President Barack Obama plans to nominate Janet Yellen as vice chairman of the Federal Reserve Board, a person familiar with the matter said. Ms. Yellen, president of the Federal Reserve Bank of San Francisco since 2004, has been a strong supporter of Fed Chairman Ben Bernanke's policies to fight the deep economic downturn. One of the more dovish policy makers among the Fed's 12 regional bank presidents, Ms. Yellen has been a key advocate of the Fed's policy of near-zero interest rates and a massive expansion of the central bank's balance sheet, even as some regional Fed officials advocate for pulling back the monetary stimulus more quickly. ... [S]he could face some tough questions over whether the San Francisco Fed acted aggressively enough to quell reckless banking on the West Coast, where a large number of financial institutions have failed in the last two years.

"Tough questions" indeed. Yellen has her fans, but I'm not one of them. One of the most important issues in monetary policy right now is the debate about whether the Fed should short-circuit asset bubbles in real time or wait to clean up the expensive mess. Yellen's position was clear as early as 2005, an important year in the chronology of the bubble:

This brings me to the debate about how monetary policy should react to unusually high prices of houses -- or other assets, for that matter. ... In my view, the weight of a decision to deflate an asset price bubble rests on positive answers to three questions. First, if the bubble were to collapse on its own, would the effect on the economy be exceedingly large? Second, is it unlikely that the Fed could mitigate the consequences? Third, is monetary policy the best tool to use to deflate a house-price bubble? My answers to these questions in the shortest possible form are, "no," "no," and "no."

If there was any accountability for policymakers who played a role in the crash, Yellen's disastrous and date-critical underestimation of the bubble and its consequences would be enough to keep her in the Pacific time zone.