going public
The long nights of sleeping on his office couch are over. Nowadays Ben S. Bernanke goes home most evenings for dinner. He finds time to watch TV with his wife of 31 years, Anna, and read books on his Kindle.
Yet even as the worst of the great financial crisis has seemingly passed, and with it the government’s furious moves to bail out firms and quell panicked markets, the Federal Reserve chairman faces the most severe challenge to his institution and his own reputation since he replaced the once-venerated Alan Greenspan in 2006.
Bernanke and the Fed have come under intense attack from members of Congress and others who accuse the central bank of failing to stop the financial problem as it snowballed, and then later responding too aggressively, overstepping its authority of setting interest rates by engineering bailouts and other programs that some critics allege put billions of taxpayer dollars at risk and could later ignite inflation.
With his term expiring Jan. 31 and his reappointment a question mark, Bernanke makes a rare public appearance today in a nationally televised forum that has all the earmarks of a reelection campaign.
At a town hall meeting in Kansas City, Mo., the soft-spoken, longtime economics professor can be expected to defend the Fed’s record, explaining why the controversial bailouts and other efforts to revive moribund credit markets were necessary. A student of the Great Depression, Bernanke wanted to move quickly and aggressively to prevent the financial contagion from developing into a global economic collapse. In congressional testimony, he has staunchly defended the Fed’s integrity.
This won’t be the first time that Bernanke, 55, has made his case directly to the American public. Perhaps more than any other Fed chief, he has sought to open up the nearly century-old institution to the outside and communicate with the media and public alike.
“This is an extraordinary time,” he told The Times. “It’s important for me to hear from people outside of Washington. And I want to answer the questions that I know people have about the economy, the Fed and the Fed’s actions during this crisis.”
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Fed under fire
Bernanke, who came to Washington in 2002 as a Fed governor after 23 years of teaching at Stanford and Princeton, has exhibited a steely cool during often-hostile grilling on Capitol Hill. Lawmakers on both sides of the aisle are pressing to expand audits of the central bank, which could threaten the Fed’s ability to make monetary policy decisions free from political influence.
Under President Obama’s proposal for financial regulatory reform, the Fed could be given expanded oversight powers to go with its mandate to ensure price stability and full employment. But at the same time, the Obama plan would strip the Fed of its existing consumer protection authority and give those responsibilities to a new agency.
Both steps require action by Congress, where there is significant opposition to the Fed. What’s more, some lawmakers want to even dismantle the dozen Federal Reserve banks around the country, traditionally centers for check clearing.
“This is a period of great vulnerability for the Fed,” said Laurence Meyer, a Washington economist and former Fed governor.
Meyer and many others, however, say odds favor Bernanke to be reappointed by Obama. Bernanke has strong backing from economists and is well regarded in the White House, where he has had a long and good relationship with the president’s economics team, including Christina Romer, with whom Bernanke played bridge when they were both teaching at Princeton, and former Treasury Secretary Lawrence H. Summers. The latter is often mentioned as a potential candidate for Fed chief, but is generally seen as an underdog because of his forceful style.
Bernanke’s tenure also could hinge on how the fragile economy performs as well as the overall standing of the Fed, which until the financial crisis last fall was little known to the public beyond the occasional larger-than-life chairmen with whom the Fed came to be identified.
When Bernanke took over the mantle from Greenspan, his aim was to de-emphasize the chairman’s role and put the focus on the institution, its board of governors and Fed Bank presidents who set monetary policy, and the 2,000 economists, researchers and others that constitute the Federal Reserve System.
At board meetings around the big mahogany and granite table inside Fed headquarters in Washington, Bernanke set a tone of collegiality and more consensus building than Greenspan or other dominant Fed leaders such as cigar-chomping Paul Volcker, preferring not to raise his profile. But that didn’t last long.
With global finances and the Fed’s reputation imperiled, Bernanke has asserted his leadership. In addition to dropping its key lending rate to banks to nearly zero interest, the Fed has taken unprecedented action by invoking emergency powers under the 1913 Federal Reserve Act to prop up Bear Stearns Cos., American International Group Inc., Bank of America Corp., Citigroup Inc. and other faltering institutions. Bernanke’s Fed has bought hundreds of billions of dollars of government debt to drive down mortgage rates.
At the same time, with the help of his communications staff and a speech consultant, Bernanke has engaged the public in ways once unimaginable.
Although Fed chiefs frequently give prepared remarks, the long-standing practice was to shy away from open-ended media events. In his rookie year as chairman, Greenspan gave an interview on “Meet the Press” in October 1987, which some believe contributed to the stock market crash a week later. He never did another television interview in the next 18 years on the Fed.
Twenty-two years later, Bernanke broke the silence, appearing on CBS’ “60 Minutes” in March. And by all accounts it was a big success as the news program ushered him back to his small-town roots in South Carolina, where young Bernanke was state spelling-bee champ and taught himself calculus.
There, in the town of Dillon, population 6,000, the Fed chairman sat on a corner bench close to where his grandfather opened a drugstore decades ago and plainly spoke his mind about how he had never been on Wall Street, his anger in the way AIG in particular made reckless bets that threatened the economy and what he viewed as some early signs of economic recovery, or green shoots, as he called them.
Bernanke also held a news conference in Washington this year, another rarity, and then a forum at Morehouse College in Atlanta -- all part of an overall push to get out there and better communicate with lawmakers, journalists and the public. At movie theaters across the country, the Fed ran spots warning consumers about mortgage scams.
“I think it’s a good idea. The Fed should be demystified,” said Rep. Barney Frank (D-Mass.), the powerful chairman of the House Financial Services Committee.
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Countering critics
The town hall meeting in Kansas City raises the stakes. The meeting, inside the new Kansas City Fed Bank building, will take Bernanke away from the hostility on Capitol Hill, giving him more freedom to counter his critics. He will take questions from news host Jim Lehrer and an invited audience, which, if it reflects the public at large, is likely to include people struggling with soaring unemployment, the threat of foreclosures and choked-off credit for their small businesses.
“We’re not ground zero for Wall Street excesses, and we’re not ground zero for housing excesses,” said Chris Lester, senior vice president of the Greater Kansas City Chamber of Commerce. “But we’re hurting. This is a long and tough recession.”
Bernanke has said he expects the nation’s economy to turn the corner later this year but that recovery will be slow, with high unemployment likely to persist for some time. He will also most likely tell the audience why the Fed felt compelled to prevent giant firms from collapsing and that the central bank has been acting in the public’s interest, not striking private pacts for investor benefits or taking undue risks with taxpayer dollars.
Although the town-hall-style meeting comes with uncertainties, people who know Bernanke say they expect him to flourish. Although he isn’t particularly charismatic, the professorial Bernanke knows how to get his message across, explaining complex subjects in a clearer way than Greenspan could.
Bernanke “has this wonderful way of summarizing . . . bringing all of the threads together in a coherent statement,” said Donald L. Kohn, a Fed vice chairman.
But for some things, Bernanke may not have an easy answer. In the wake of the financial crisis, Greenspan, who was lionized during his two decades of Fed leadership, has been roundly criticized for not getting on top of lax mortgage lending standards in 2002 and 2003 when things got out of hand. Bernanke joined the Fed board as governor in 2002.
“The whole board shares some blame for that,” said Alice Rivlin, a Fed governor from 1996 to 1999 and currently senior fellow at the Brookings Institution.
In congressional testimony and an interview last week, she contended that the Fed should not be given additional regulatory powers, especially such an important one as the Obama administration is proposing in which the central bank would be a kind of super-regulator of financial institutions considered too big to fail.
“I don’t think they’re particularly good at it,” Rivlin said of the Fed’s regulatory capabilities. “I think regulations take meticulous lawyers, and it’s a different set of people and skills than macro-economists.”
Bernanke has acknowledged that the Fed could have done more earlier, but has stressed that in the last three years since he became chairman the central bank has significantly bolstered its consumer protection efforts. Late last year it tightened credit card rules, and this week it outlined ways to help protect borrowers taking out mortgages and home-equity loans.
The sweeping new rules would help consumers with more timely disclosures and by curbing abusive fees from mortgage brokers. The proposal is aggressive, but it may not be enough to help the Fed hold on to its consumer protection authority.
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(BEGIN TEXT OF INFOBOX)
Ben S. Bernanke
Title: Chairman, Federal Reserve System
Born: December 1953 in Augusta, Ga.
Family: Wife Anna and two children
Education: Harvard College, BA. Massachusetts Institute of Technology, PhD
Work experience: Professor at Stanford University and Princeton University. Once waited tables.
Published works: Essays on the Great Depression and economic textbooks
Hobbies: Reading and attending baseball games and cultural events
