Should Bernanke be explaining US policy?
The WSJ leads today with a story on what it calls “Bernanke’s PR Push“, saying that the Fed chairman “is waging a public-relations offensive” and conducting a “campaign for openness”. This is good in the short term, but I’m not sure it’s good in the long term.
Alan Blinder gets the problem exactly right:
“The American public is seeing things happening that it doesn’t like and doesn’t understand and nobody is really explaining it to them,” says Alan Blinder, a Princeton professor and former Fed vice chairman. “That was true in the Bush administration and it remains largely true in the Obama administration. The Fed is filling the void.”
The only really good communicator on Obama’s economic team is the president himself. Summers is bad at talking in public, with his remarks being ill comprehended by the American people up to and including the faculty of Harvard. Geithner famously flubbed his first major presentation as Treasury secretary so badly that his do-over was conducted far from any television camera. And so it falls to Bernanke to provide the clear explanations of economic policy that the American public so desperately wants.
The problem, of course, is the one of Fed independence: if Bernanke becomes the person best able to explain the Obama administration’s economic policy, it becomes much more difficult for him to credibly say that he is genuinely independent of the White House. As Greg Ip explains:
The controversy also comes at a delicate moment for the Fed. Two governors’ seats are vacant and Ben Bernanke’s four-year term as chairman ends next January. The Fed also needs favours from Congress: it would like authority to issue debt securities to soak up the excess liquidity its rescue operations have created, or for the Treasury to have authority on its behalf. The Treasury is seeking to revamp financial rules and give the Fed more sway over the financial system. Hostile congressmen could seize on such initiatives to impose changes that the Fed doesn’t want.
What’s more, Bernanke is far from secure in his job:
Friends and associates of the central bank chief were appalled in November when word leaked out of Mr. Obama’s transition team that Mr. Summers could be a successor to Mr. Bernanke.
“It was a terrible thing to start lame-ducking the chairman of the Fed a year before his term is over,” says Mr. Blinder.
In many ways, Bernanke is taking on responsibilities which should properly be those of the Treasury secreatary rather than the Fed chairman. Maybe, if Summers gets his way and takes Bernanke’s job, Obama might consider moving Bernanke to Treasury? Geithner’s not an economist by training so maybe he shouldn’t just fill the empty position at the NEC, but it does make sense to put him in more of a technocratic advisory role — where he shines — as opposed to his current executive role, where he does seem to be struggling.
In any case, I’m glad that Bernanke is coming into his own and putting his professorial skills to good use: having someone with the ability to speak English is surely better than having no one.