Fed Nominee Heads to Capitol Hill to Testify

Ben S. Bernanke, President Bush’s pick to succeed Alan Greenspan at the Federal Reserve, heads to Capitol Hill on Tuesday with two key tasks: convincing financial markets that he’ll be tough on prices while reassuring lawmakers that he’s not overly hawkish on inflation.

The balancing act Bernanke will need to perform as he testifies before the Senate Banking Committee will be only the first of many he will face as chairman of the central bank.

Like Greenspan, the former Fed governor and White House advisor will need to navigate tough political straits again and again if he wins Senate confirmation, as widely expected.

His central theme this week, analysts and associates agree, will be one he stressed last month when Bush chose him to replace Greenspan after 18 years at the Fed’s helm.

“If I am confirmed to this position, my first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years,” Bernanke said the day Bush nominated him.

The carefully crafted message was intended to ease concerns that he would initiate wholesale changes at the Fed.

As one of the nation’s leading academics on monetary issues, the vocal Bernanke has been in the forefront of a push to get the central bank to publicly state a target for acceptable inflation, a step Greenspan has opposed.

Democrats are expected to seek assurances from the former Princeton professor that the Fed will never forget that Congress gave it two goals -- price stability and full employment -- and that the latter will not be sacrificed to achieve the former.

But for many investors, especially in the bond market, a key constituency for any central banker, the concerns lie on the other side of the equation.

Bernanke’s aggressive stance in 2003 on the need to combat deflation, a potentially harmful broad price decline, led some to think he might be too soft on the Fed’s traditional enemy of rising prices, a real worry now as energy costs soar.

“The issue isn’t what he needs to do to be confirmed,” said Nicholas Checa, a managing director at Kissinger McLarty Associates, a consulting firm. “The real issue is what he needs to do and not do to overcome concerns there may be about him in markets and political circles.”