So Long to Bernanke and His Tight-Money Fed

The Wall Street Journal is on the hard-money side of the debate over recent monetary policy. But its editorial on the departure of Ben S. Bernanke as chairman of the Federal Reserve articulated a conventional wisdom that transcends that debate.

The consensus assessment is that the Fed under Bernanke's leadership kept interest rates too low during the boom years of the last decade, which contributed to the financial crisis, but when the crisis hit, the Fed's heroic efforts staved off a reprise of the Great Depression. The Journal allows that time will tell about the post-crisis policies, but expresses skepticism.

There's another view of the Fed's role in the crisis, though, that has been voiced by economists such as Scott Sumner of Bentley University, David Beckworth of Western Kentucky University and Robert Hetzel of the Richmond Fed. They dissent from the prevailing view that the Fed has been extremely loose since the crisis hit. Instead, they argue that the Fed has actually been extremely tight, and that when its performance during the crisis is measured against the proper yardstick, the central bank emerges as the chief villain of the story.