Next Fed chief: smartest ever?
NEW YORK — When he wasn't studying economics at MIT, Ben Bernanke, nominee for chairman of the Federal Reserve Board, might have been cheering on the Red Sox at Fenway Park.
And when he wasn't studying in high school - he scored a 1590 on his SAT - he was All-State saxophonist.
As a child, he honed his analytical mind by playing chess and studying Hebrew at the local synagogue. He was just "an outgoing and well-rounded" kid growing up in the small town of Dillon, S.C., says his brother, Seth, an attorney in Charlotte, N.C.
Easygoing, extremely smart, plain-spoken - these are some of the words being used to describe Mr. Bernanke (ber-NANK-ee) as he prepares to lead an often inscrutable band of monetary policymakers. He has sterling economic credentials, but his ability to speak to Main Street as easily as Wall Street may be the trait that best prepares him for a job in which his every utterance can move global markets.
Although he is currently the chairman of the President's Council of Economic Advisors (CEA), Bernanke has never been overtly political.
Jeffrey Frankel, a former member of the CEA under President Clinton, has known Bernanke for 30 years since they both were at MIT earning PhDs. Yet, he says, he never knew Bernanke's political affiliation. "I believe he will have the ... independence and not take orders straight from the White House," says Mr. Frankel, now at Harvard's Kennedy School of Government in Cambridge, Mass.
On Monday at a press conference, Sen. Charles Schumer (D) of New York described a telephone conversation he had that day with Bernanke to discuss the nominee's recent endorsement of extending President Bush's tax cuts.
"He assured me he was speaking only as the chairman of the President's Council of Economic Advisors," said Senator Schumer, a member of the Senate Banking Committee, which will hold confirmation hearings. Schumer, who has met Bernanke many times, called him "erudite and thoughtful."
Economists say Bernanke might have the best academic background of any recent Fed chairman. He graduated summa cum laude from Harvard; four years later he finished up his doctorate at MIT. He taught economics at NYU, Stanford, and Princeton.
He is the author of respected textbooks on the Great Depression and inflation. He's written more than 39 weighty articles in "economese," that strange language used by economists. And, he holds titles in enough professional associations, such as Co-editor of Economics Letters, to keep most people busy for a lifetime.
"He may have the best intellectual training and pedigree of anyone who has held that office," says Bob Brusca of Fact And Opinion-Economics, in New York.
Despite his long academic career, Bernanke is also known as a "straight-talking" economist, who has been forthcoming in discussing the nation's economic issues. "Both [former Fed Chairman Paul] Volcker and [current Fed Chairman Alan] Greenspan took pride in obfuscation, but this is not his style," says Frankel. "He's been very candid."
In recent years, the Fed has become more open, releasing minutes of meetings and allowing members to make public comments about economic issues.
It's a trend that is likely to continue, if not expand, should Bernanke be confirmed by the Senate and assume duties after Mr. Greenspan retires in January. In a speech this March in Dayton, Ohio, Bernanke concluded, "Growing appreciation of the fact that greater openness makes monetary policy more effective is, I believe, an important reason for this welcome trend."
Immediately after Mr. Bush announced on Monday that he would nominate the soft-spoken economist to replace Greenspan, Bernanke said he would embark on a policy of continuity.
The financial markets, already well aware of Bernanke's views from his speeches and writing, reacted with its best gain in six months. "That wouldn't happen with just any Joe Blow," says Lyle Gramley, a former Fed governor who works as a consulting economist at the Schwab Washington Research Group.
One of the differences between Bernanke and Greenspan is the way they approach inflation.
Bernanke is an adherent to "inflation targeting" - the setting of a numerical goal for the Consumer Price Index. This is the way many other central banks, including the European Central Bank, operate.
Greenspan, who once said his goal was zero inflation, had more of an implicit target. Sometimes he would focus on productivity; other times economic growth. Built into those goals are inflation plateaus. "There is not that much of a difference," says Mr. Gramley.
Bernanke has apparently already wondered what life is like after government service, recalls Gramley. Both men attended the panel in Dayton this March where Bernanke gave a speech, and they shared a car back to the airport.
"He wondered what I was doing and what he might do," recalls Gramley. "I replied that when he leaves government service he's worth an enormous amount of money."
How much money? Gramley says Bernanke will be able to take his government salary - Congress sets the Fed chairman's salary at $180,100 - and probably move the decimal point at least one place to the right. "Being Fed chairman only increases his value that much more."