I think Bernanke is a pretty cool guy, eh cuts interest rates and doesn't afraid of recession
An unlikely revolutionary, Bernanke draws kudos, ire
Every six weeks or so, around a giant mahogany table in an ornate room overlooking the National Mall, 16 people, one after another, give their take on how the U.S. economy is doing and what they, the leaders of the Federal Reserve, want to do about it.
Then there's a coffee break. While most of the policymakers make small talk in the hallway, their chairman, Ben Bernanke, pops into his office next-door and types out a few lines on his computer.
When the Federal Open Market Committee reconvenes, Bernanke speaks from the notes he printed moments earlier. "Here's what I think I heard," he'll say, before running through the range of views. He sometimes articulates the views of dissenters more persuasively than they did.
"Did I get it right?" he says.
The answer, in recent months, has been a resounding yes. And Bernanke's ability to understand and synthesize the views of his colleagues goes a long way toward explaining how he has revolutionized the Federal Reserve, which under his leadership has deployed trillions of dollars to try to contain the worst economic downturn in 80 years.
Famously soft-spoken, Bernanke is an unlikely revolutionary. He is, after all, a career economics professor who lacks the charisma of a skilled politician. He also happens to run an organization designed for inertia. Decision-making authority is shared with four other governors in Washington appointed by the president, the heads of regional Fed banks in 12 cities who answer to their own boards of directors and a staff of 2,000 that is led by economists who spent decades working their way through a rigid hierarchy.
Yet in the past 18 months, Bernanke has transformed that stodgy organization, invoking rarely used emergency authorities. His decision to do so has drawn criticism -- he has transcended traditional limits on the role of a central bank, stretched the Fed's legal authority and to some, usurped the responsibility of political authorities in committing vast sums of taxpayer dollars.
"The real risk is that he will wind up instigating rampant inflation" once the recession has passed, he said. "A related possibility is that the Fed has created incentives to overdo it in borrowing and lending ... which is what got us into this mess in the first place."
What strikes many who have worked with Bernanke, though, is that he has pulled it all off without grand speeches, arm-twisting or Machiavellian games. Rather, according to interviews with more than a dozen current and former Fed officials and others familiar with the workings of the central bank, he has enacted bold policy moves through measured, intellectual debates and by making even those who are resistant to some of the new actions feel that their concerns are understood.
To many Fed veterans, his leadership style is a stark contrast with that of his predecessor, Alan Greenspan, whose tenure was characterized by tightly controlled decision-making with only rare open disagreement.
"He succeeds at persuading people by respecting their points of view and through the force of his own intellect," said Alan Blinder, a former Fed vice chairman and longtime colleague of Bernanke's at Princeton University. "He doesn't say you're a jerk for disagreeing."
In other words, Bernanke has remade the Federal Reserve not in spite of his low-key style and proclivity for consensus-building. He has been able to remake the Fed because of it.
--
More than a few times over the past year, senior Fed staff members have logged into their e-mail accounts to find an unusual message. Subject: Blue Sky. Sender: Ben S. Bernanke.
The point of the e-mails has been to encourage them to think of creative ways that the Fed can guard the economy from the downdraft of a financial collapse.
This is an institution that not long ago could spend the better part of a two-day policymaking meeting deciding whether its target for short-term interest rates should be 5.25 percent or 5 percent. But in this crisis, rate cuts, the most common tool for helping the economy, have lacked their usual punch. The Fed already has dropped the rate it controls essentially to zero, meaning there is no room left to cut.
That's why Bernanke's Fed has been trying to dream up ideas out of the clear blue sky. The result has been 15 Fed lending programs, many with four-letter acronyms, most of them unthinkable before the current crisis.
Under one unconventional program, the Fed is providing money for auto loans and credit card loans. Under another, it is making money available for home mortgages.
Many of the programs have required legal and financial gymnastics to enact, with the central bank being forced to invoke an emergency authority that allows it to lend to most any institution in "unusual and exigent circumstances." In the end, though, they have allowed the Fed to effectively create money to keep lending going.
Bernanke has said his academic research, especially about the Great Depression, convinced him that the Fed has no choice but to move forcefully during a financial crisis, even if doing so means it crosses conventional boundaries.
"Everyone is encouraged to come up with ideas that are a little bit out of the ordinary, to try to encourage creative approaches and to think outside of the box, which is not the usual central bank approach," Bernanke said in an interview.
Dozens of staff members have been involved in figuring out how to execute the programs, but for many, Bernanke has been the catalyst.
In November, for instance, the Fed moved to push down mortgage rates by buying $600 billion in mortgage-related securities; in March, it increased that number by another $850 billion.
But sources said Bernanke raised the possibility internally more than a year ago, and he pushed to make sure the Fed was prepared to act.
--
The decision to flood money into the mortgage market was not Bernanke's alone; the power to do so belonged to the Federal Open Market Committee, which he leads. The four other governors serve on it, as does a rotating group of five of the 12 presidents of regional Fed banks.
In November, Bernanke called individual committee members to see whether they would be open to the Fed inserting itself into the mortgage market.
At the time, some committee members viewed the purchase of mortgage securities as a way to lower mortgage rates, encourage home sales and thus find a bottom for the housing market. Others said that buyers were irrationally avoiding even safe mortgage assets and that the Fed needed to act to make the markets to function more normally. Still others wanted the Fed to boost confidence in Fannie Mae and Freddie Mac by making more explicit the idea that the U.S. government stood behind the mortgage finance giants.
There were worries, too, that buying mortgage-related securities could make it hard for the Fed to suck money out of the economy once it began to recover, which could lead to inflation, or that doing so could put the government in the role of favoring housing over other sectors.
Bernanke guided the group toward a conclusion. Even though members had differences, most agreed that the economy was in bad shape and that the Fed's purchase of mortgage debt would likely help matters.
From the day he became chairman three years ago, Bernanke has tried to make the Fed culture less hierarchical. Senior staff members now commonly refer to governors by first names, instead of addressing them with the title "Governor," as they did previously. (The big boss is still Chairman Bernanke.)
And whereas Greenspan once was briefed before policymaking meetings in ritualistic sessions with staff, Bernanke presides over sessions with more debate and discussion, often involving anyone on the staff with expertise on an issue rather than just top-level directors.
A decade ago, when the Fed wanted to know how it might deal with technical issues created by the government's need for fewer Treasury bonds, a study of the issue took 18 months and involved 73 economists across the Fed system. The result was a 165-page report.
This year, the Fed has made decisions of similar complexity and importance over a single weekend.
--
The Fed's actions have not gone unquestioned -- its inspector general is reviewing all the programs it has launched under its emergency lending authority and members of Congress have become increasingly skeptical toward the central bank.
But in developing responses to the crisis, Bernanke collaborated extensively with the Bush administration, and has done so under the Obama administration, even though the Fed traditionally maintains its distance from political authorities.
His inclination to build consensus has extended internationally as well. In October, he played a leading role in engineering a joint global interest rate cut with the European Central Bank and the central banks of Britain, Canada, Switzerland and Sweden. He is particularly close with Bank of England Governor Mervyn King, who shares his academic background, and has quietly urged European Central Bank President Jean-Claude Trichet to move more aggressively to stimulate the economies of Europe.
Bernanke came into office aiming to depersonalize the role of Fed chairman. As Greenspan's successor, he aspired to be more anonymous bureaucrat than celebrity economist.
But people who have worked with him say he has become more politically savvy over the past 18 months, developing a better sense for what's palatable to Congress. In the early days of the crisis, sources said, he suggested solutions to the foreclosure problem that would have been more expensive than lawmakers would have ever considered.
He has also learned how to make his case publicly. In a first for a Fed chairman, he appeared at a de facto news conference, responding to questions from reporters at the National Press Club after a speech. Then, in another first, he sat for an interview with "60 Minutes," arguing that the biggest risk to the economy would be a lack of "political will" to solve the financial crisis.
Richard Fisher, president of the Dallas Fed, said the television interview was important. It gave Americans some reassurance about the economy, and Bernanke came across as thoughtful and deliberate.
"We all know Ben is not a publicity seeker," Fisher said. "All of us, in the world of central bankers, are meant to be felt but not seen. But these are unusual times."
Source
As a non-academic, the Federal Reserve is pretty mysterious and fascinating. too bad its hard to read about online w/o running into the "ZEITGEIST 9/11 NWO JEWS" crowd. Anyway some of this article is encouraging and some of it isn't, but hey that's life.
Every six weeks or so, around a giant mahogany table in an ornate room overlooking the National Mall, 16 people, one after another, give their take on how the U.S. economy is doing and what they, the leaders of the Federal Reserve, want to do about it.
Then there's a coffee break. While most of the policymakers make small talk in the hallway, their chairman, Ben Bernanke, pops into his office next-door and types out a few lines on his computer.
When the Federal Open Market Committee reconvenes, Bernanke speaks from the notes he printed moments earlier. "Here's what I think I heard," he'll say, before running through the range of views. He sometimes articulates the views of dissenters more persuasively than they did.
"Did I get it right?" he says.
The answer, in recent months, has been a resounding yes. And Bernanke's ability to understand and synthesize the views of his colleagues goes a long way toward explaining how he has revolutionized the Federal Reserve, which under his leadership has deployed trillions of dollars to try to contain the worst economic downturn in 80 years.
Famously soft-spoken, Bernanke is an unlikely revolutionary. He is, after all, a career economics professor who lacks the charisma of a skilled politician. He also happens to run an organization designed for inertia. Decision-making authority is shared with four other governors in Washington appointed by the president, the heads of regional Fed banks in 12 cities who answer to their own boards of directors and a staff of 2,000 that is led by economists who spent decades working their way through a rigid hierarchy.
Yet in the past 18 months, Bernanke has transformed that stodgy organization, invoking rarely used emergency authorities. His decision to do so has drawn criticism -- he has transcended traditional limits on the role of a central bank, stretched the Fed's legal authority and to some, usurped the responsibility of political authorities in committing vast sums of taxpayer dollars.
"The real risk is that he will wind up instigating rampant inflation" once the recession has passed, he said. "A related possibility is that the Fed has created incentives to overdo it in borrowing and lending ... which is what got us into this mess in the first place."
What strikes many who have worked with Bernanke, though, is that he has pulled it all off without grand speeches, arm-twisting or Machiavellian games. Rather, according to interviews with more than a dozen current and former Fed officials and others familiar with the workings of the central bank, he has enacted bold policy moves through measured, intellectual debates and by making even those who are resistant to some of the new actions feel that their concerns are understood.
To many Fed veterans, his leadership style is a stark contrast with that of his predecessor, Alan Greenspan, whose tenure was characterized by tightly controlled decision-making with only rare open disagreement.
"He succeeds at persuading people by respecting their points of view and through the force of his own intellect," said Alan Blinder, a former Fed vice chairman and longtime colleague of Bernanke's at Princeton University. "He doesn't say you're a jerk for disagreeing."
In other words, Bernanke has remade the Federal Reserve not in spite of his low-key style and proclivity for consensus-building. He has been able to remake the Fed because of it.
--
More than a few times over the past year, senior Fed staff members have logged into their e-mail accounts to find an unusual message. Subject: Blue Sky. Sender: Ben S. Bernanke.
The point of the e-mails has been to encourage them to think of creative ways that the Fed can guard the economy from the downdraft of a financial collapse.
This is an institution that not long ago could spend the better part of a two-day policymaking meeting deciding whether its target for short-term interest rates should be 5.25 percent or 5 percent. But in this crisis, rate cuts, the most common tool for helping the economy, have lacked their usual punch. The Fed already has dropped the rate it controls essentially to zero, meaning there is no room left to cut.
That's why Bernanke's Fed has been trying to dream up ideas out of the clear blue sky. The result has been 15 Fed lending programs, many with four-letter acronyms, most of them unthinkable before the current crisis.
Under one unconventional program, the Fed is providing money for auto loans and credit card loans. Under another, it is making money available for home mortgages.
Many of the programs have required legal and financial gymnastics to enact, with the central bank being forced to invoke an emergency authority that allows it to lend to most any institution in "unusual and exigent circumstances." In the end, though, they have allowed the Fed to effectively create money to keep lending going.
Bernanke has said his academic research, especially about the Great Depression, convinced him that the Fed has no choice but to move forcefully during a financial crisis, even if doing so means it crosses conventional boundaries.
"Everyone is encouraged to come up with ideas that are a little bit out of the ordinary, to try to encourage creative approaches and to think outside of the box, which is not the usual central bank approach," Bernanke said in an interview.
Dozens of staff members have been involved in figuring out how to execute the programs, but for many, Bernanke has been the catalyst.
In November, for instance, the Fed moved to push down mortgage rates by buying $600 billion in mortgage-related securities; in March, it increased that number by another $850 billion.
But sources said Bernanke raised the possibility internally more than a year ago, and he pushed to make sure the Fed was prepared to act.
--
The decision to flood money into the mortgage market was not Bernanke's alone; the power to do so belonged to the Federal Open Market Committee, which he leads. The four other governors serve on it, as does a rotating group of five of the 12 presidents of regional Fed banks.
In November, Bernanke called individual committee members to see whether they would be open to the Fed inserting itself into the mortgage market.
At the time, some committee members viewed the purchase of mortgage securities as a way to lower mortgage rates, encourage home sales and thus find a bottom for the housing market. Others said that buyers were irrationally avoiding even safe mortgage assets and that the Fed needed to act to make the markets to function more normally. Still others wanted the Fed to boost confidence in Fannie Mae and Freddie Mac by making more explicit the idea that the U.S. government stood behind the mortgage finance giants.
There were worries, too, that buying mortgage-related securities could make it hard for the Fed to suck money out of the economy once it began to recover, which could lead to inflation, or that doing so could put the government in the role of favoring housing over other sectors.
Bernanke guided the group toward a conclusion. Even though members had differences, most agreed that the economy was in bad shape and that the Fed's purchase of mortgage debt would likely help matters.
From the day he became chairman three years ago, Bernanke has tried to make the Fed culture less hierarchical. Senior staff members now commonly refer to governors by first names, instead of addressing them with the title "Governor," as they did previously. (The big boss is still Chairman Bernanke.)
And whereas Greenspan once was briefed before policymaking meetings in ritualistic sessions with staff, Bernanke presides over sessions with more debate and discussion, often involving anyone on the staff with expertise on an issue rather than just top-level directors.
A decade ago, when the Fed wanted to know how it might deal with technical issues created by the government's need for fewer Treasury bonds, a study of the issue took 18 months and involved 73 economists across the Fed system. The result was a 165-page report.
This year, the Fed has made decisions of similar complexity and importance over a single weekend.
--
The Fed's actions have not gone unquestioned -- its inspector general is reviewing all the programs it has launched under its emergency lending authority and members of Congress have become increasingly skeptical toward the central bank.
But in developing responses to the crisis, Bernanke collaborated extensively with the Bush administration, and has done so under the Obama administration, even though the Fed traditionally maintains its distance from political authorities.
His inclination to build consensus has extended internationally as well. In October, he played a leading role in engineering a joint global interest rate cut with the European Central Bank and the central banks of Britain, Canada, Switzerland and Sweden. He is particularly close with Bank of England Governor Mervyn King, who shares his academic background, and has quietly urged European Central Bank President Jean-Claude Trichet to move more aggressively to stimulate the economies of Europe.
Bernanke came into office aiming to depersonalize the role of Fed chairman. As Greenspan's successor, he aspired to be more anonymous bureaucrat than celebrity economist.
But people who have worked with him say he has become more politically savvy over the past 18 months, developing a better sense for what's palatable to Congress. In the early days of the crisis, sources said, he suggested solutions to the foreclosure problem that would have been more expensive than lawmakers would have ever considered.
He has also learned how to make his case publicly. In a first for a Fed chairman, he appeared at a de facto news conference, responding to questions from reporters at the National Press Club after a speech. Then, in another first, he sat for an interview with "60 Minutes," arguing that the biggest risk to the economy would be a lack of "political will" to solve the financial crisis.
Richard Fisher, president of the Dallas Fed, said the television interview was important. It gave Americans some reassurance about the economy, and Bernanke came across as thoughtful and deliberate.
"We all know Ben is not a publicity seeker," Fisher said. "All of us, in the world of central bankers, are meant to be felt but not seen. But these are unusual times."
Source
As a non-academic, the Federal Reserve is pretty mysterious and fascinating. too bad its hard to read about online w/o running into the "ZEITGEIST 9/11 NWO JEWS" crowd. Anyway some of this article is encouraging and some of it isn't, but hey that's life.