Four more years

LITTLE ROCK — A few days ago, Ben S. Bernanke, the chairman of the Federal Reserve, stood before a gathering of Fed officials in Jackson Hole, Wyoming, and made the argument for his reappointment to another four-year term. Mr. Bernanke didn't do so explicitly, to be sure; he avoided the first-person singular as he ticked off Fed actions which, in his view, had prevented another Great Depression. But his point was clear: "As severe as the economic impact has been," he observed, "the outcome could have been decidedly worse. Unlike in the 1930s, when policy was largely passive . . . during the past year monetary, fiscal, and financial policies around the world have been aggressive and complementary. Without these speedy and forceful actions . . . the entire global financial system would have been at serious risk."

President Obama evidently agrees. In a welcome show of bipartisanship, he announced Tuesday that he will submit Mr. Bernanke's name to the Senate for another hitch as chairman, starting January 31, 2010. The president thus opted for continuity at the Fed, even though it means picking a Republican appointee of President George W. Bush over Democratic contenders such as White House economic adviser Lawrence H. Summers.

It's a good call. Mr. Bernanke has anything but a perfect record. In hindsight, he waited too long to crack down on subprime lending or to recognize the damage that these risky loans were doing to the broader economy. But when it mattered most, at the height of the crisisin 2008, Mr. Bernanke showed audacity and wisdom, creatively using the Fed's emergency powers to keep the financial sector from crashing. The cost-including the especially galling cost of bailing out reckless firms such as American International Group-has been steep. But Mr. Bernanke, despite much criticism, correctly understood that this was the price of financial stability, a very valuable public good which could not otherwise be had.

Adept as it has been, Mr. Bernanke's crisis management has generated new questions. The first concerns the Fed's appropriate role in a democratic system. In expanding the

Fed's balance sheet, he has committed U.S. taxpayers to $1 trillion worth of obligations without a vote in Congress. He used broad, congressionally authorized emergency powers to do it, but will that authority seem sufficient once the crisis passes? And the Fed's failure to spot looming crises, under both Mr. Bernanke and his predecessor, Alan Greenspan, casts some doubt on current moves to empower the central bank to regulatesystemic risk.

The second question is how and when to mop up the ocean of liquidity that Mr. Bernanke has released, so as to head off inflation without aborting growth. Mr. Bernanke, whose lifelong study of the Great Depression shaped his decisionmaking over the past year, has earned the opportunity to devise the "exit strategy"-to finish what he started. The exit may be no less challenging than the entrance, though we hope it will be less exciting.