Can Ben Bernanke buoy the economy and fend off Fed critics, too?

When Ben Bernanke speaks these days, his job description may be characterized as political as well as economic.
 
No, the Federal Reserve chairman isn't using his words to weigh in overtly in the nation's presidential campaign. But a weak economy, and the Fed's role on the front lines of economic policy, mean that the nation's central bank faces no small amount of criticism these days from both the political left and right.
 
Mr. Bernanke faces pressure to defend his institution as credible and successful – one that doesn't need to be the target for the next legislative reform bill.

Signs of the times: Some lawmakers are blasting the Fed for what they see as too-cozy ties with private-sector banks, Republican presidential nominee Mitt Romney says he would replace Bernanke with someone new, and the Republican Party platform calls for a commission to consider a return to a gold standard for monetary policy.
 
Bernanke's efforts to defend the Fed, as well as to guide financial markets on potential policy changes, were on display again Friday, as the Fed chief delivered a major policy speech in which he hinted at further moves to stimulate the economy.
 
"Accommodative monetary policies ... both traditional and nontraditional, have provided important support to the economic recovery while helping to maintain price stability," he asserted in remarks delivered to fellow economists at an annual policymaker retreat in Jackson Hole, Wyo.
 
Despite concerns in some quarters that Fed easing will spark inflation, Bernanke said a key gauge of consumer prices has remained near the Fed's goal of a roughly 2 percent annualized increase, "and inflation expectations have remained stable."
 
"The economic situation is obviously far from satisfactory," he said, a signal that the Fed is considering a more unconventional stimulus – a third round of so-called quantitative easing. Such a QE3 policy would involve Fed bond purchases designed to lower interest rates, push up prices for financial assets including stocks, and boost private sector activity.
 
Even some economists who are generally fans of the Fed view QE3 as a move that may do little to help the economy. And it could leave the Fed with a tougher task when the time eventually comes to fend off inflation by downsizing its already large holdings of bonds.
 
Meanwhile, especially on the political right, Fed critics blame its easy-money policies in part for the financial crisis, and for what they see as a relentless tendency to debase the dollar's value by tolerating inflation. The idea of a setting up a gold commission, to consider restoring the dollar's link to precious metal, is the Republican Party's nod to public concern about inflation, and to the zeal of the party's libertarian Ron Paul wing on this issue.
 
In his Thursday speech accepting the presidential nomination, Mr. Romney emphasized rising prices for health insurance, food, and gasoline.
 
Many Republicans or libertarians would, at a minimum, like to replace the Fed's "dual mandate" (to seek both full employment and price stability) with a single mandate geared toward noninflationary growth for the economy.
 
Bernanke, although a former top economic adviser to Republican President George W. Bush, hasn't complained about the dual mandate as a problem for Fed policy.

He faces critics on the left, though, who argue the Fed is doing too little to bring down joblessness. Sen. Bernie Sanders, an independent from Vermont, has been among those in this camp. Mr. Sanders also has been leading a charge to reform the governance of regional Fed banks, where private-sector bankers play a prominent role as directors even as the Fed is tasked with regulatory oversight of their companies.

Bernanke's response, so far, is partly that Congress created the Fed's governance system, and can change it if lawmakers choose.

Bernanke was appointed by President Bush and reappointed by President Obama to a four year term ending in 2014.

Romney, by indicating his preference for replacing Bernanke with someone who supports a "strong dollar," has drawn fire from liberals.

Dean Baker, co-director of the Center for Economic Policy and Research, says this amounts to a bid to prop up an already-strong dollar, which weakens the ability of American firms to export.

"Romney committed himself to picking a Federal Reserve Board chairman who will try to keep workers' wages down, likely costing them tens of thousands of dollars over the next decade," is the way Mr. Baker summarizes this position, in a column this week for Huffington Post.

It's not suprising that, during an election year and with unemployment high, the Fed and monetary policy have become hot issues. But many don't buy the view of the Fed as an arch villain of the past decade. Conservative members of a commission on the 2008 financial crisis, for example, concluded that "US monetary policy may have contributed to the credit bubble but did not cause it."