Should Bernanke be explaining US policy?

By Felix Salmon
April 15, 2009

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.

5 comments

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The Fed doesn’t have to operate independently of the White House, they just need to have that option, in case they believe it would be better for the financial system (like, say, back in 2003, it would have been better if the Fed operated independently of the White House). In fact, it is desirable to have the policies and decisions of the fed and the administration in sync, rather than both entities fighting each other.

But it won’t be a shame if Bernanke doesn’t get a new 5-year deal when this contract is up. It’s actually too bad we can’t trade his expiring contract to another government for a draft choice. His only positive action before Jan 09 was convincing Bush the sucker would go down if no action was taken. The only good thing to say about the action taken is that it was better than nothing. If he is let go, I really hope Summers doesn’t get the job, as his track record isn’t any better, and he seems to be pretty good at alienating people, which should only be tolerated when you are a god. he’s not.

Posted by KenG | Report as abusive

Remarks by Governor Ben S. Bernanke
At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois
November 8, 2002
“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”
Yes we know the Federal Reserve caused the Great Depression and now it is starting all over again. The secret is out that the Federal Reserve, Trilateral Commission, and CFR are working in tandem to take down the US government. People are waking up. It is too late for the Federal Reserve. Watch the documentaries ZEITGEIST:THE FEDERAL RESERVE and OBAMA DECEPTION. The fascists that control the privately owned Federal Reserve Corporation are in serious trouble. “The Fed” is about to be nationalized and the criminals running it brought to justice. Why should the US govt. pay interest on debt when Congress has the authority to print interest free money. “The Fed” is not saving us from economic crisis as was its supposed original intention. It is creating them!

Posted by jay | Report as abusive

There is a tremendous amount of legislation that needs to be re written or done away with to give Americans an honest currency they, and the world, can truly trust. Until then we’ll just see more of the same. I don’t think any fed head will say anything different than any other fed head has but perhaps the delivery will be better. That really gives me something to believe in. cough, choke, hack, cough, cough, cough…

Posted by jason | Report as abusive

what about christina romer? i had her for economics back at berkeley and can attest that she’s definitely more than capable of explaining economic policy to anyone.

Posted by dk | Report as abusive

I have nothing but respect for Christie Romer, but she has not done well on TV.

Posted by rs | Report as abusive