On Thursday, Federal Reserve Chairman Ben Bernanke will make what is expected to be his last public appearance as central-bank chief.
The topic of his remarks, “The Fed Yesterday, Today, and Tomorrow,” at the launch of the new Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, will give the Fed chairman one last chance to defend his tumultuous years at the central bank through the substantial megaphone unique to the Fed chairmanship.
Bernanke, who has been at the head of the central bank since 2006, has had a lot of time to reflect on his legacy before he hands control to his successor, current Fed Vice Chairwoman Janet Yellen, on Jan. 31. The White House announced Yellen’s selection on Oct. 9; since then, Bernanke has given eight speeches and held one press conference as a lame duck.
In his last months at the helm, he has emphasized the Fed’s shift toward greater openness and defended its decision to use unconventional policies to shore up the economy in the aftermath of the financial crisis.
“Fostering transparency and accountability at the Federal Reserve was one of my principal objectives when I became chairman,” he said at the American Economic Association’s annual meeting on Jan. 3. “Our efforts to enhance transparency and communication have indeed made monetary policy more effective.” They also, he said, supported the Fed’s “democratic legitimacy” at a time when the actions it was taking were unpopular with the public (see the “End the Fed” movement), and Congress threatened to clip its wings.
“I think it’s no accident that he starts [that speech] off with transparency and accountability, because I think he does feel that, perhaps, was his most lasting contribution,” said Stephen Oliner, a former Fed economist. Under Bernanke’s watch, the central bank began to hold regular press conferences and more explicitly explain its policy decisions and goals.
“In response to a financial crisis and a deep recession, the Fed’s monetary policy communications have proved far more important and have evolved in different ways than I would have envisioned eight years ago,” Bernanke told members of the National Economists Club in a November speech dedicated to the topic.
Because monetary policy and its ripple effects act with a lag, early assessments of a Fed chairmanship can sometimes miss the mark. It will take years before history makes its final judgment on Bernanke. Former Fed Chairman Paul Volcker was viewed favorably when he left office, and is still praised for breaking the back of inflation in the early 1980s. Alan Greenspan, his successor, was famously dubbed the “maestro” for his seemingly masterful handling of the economy when he departed; the ensuing financial crisis has called his tenure at the Fed into question, and Greenspan has since found himself defending the actions he took.
“The legacy is not just something you can state the day the guy leaves the job,” said Michael Bordo, an economics professor and monetary historian at Rutgers University. “It takes years.”
Bernanke’s endeavors to explain his term before he leaves office are consistent with his longtime vocation as an economics professor and expert on the Great Depression at Princeton University, said AEI’s Oliner. “He is very introspective. He’s trying to analyze, to understand what happened during what turned out to be his own tenure. So he is starting to write his own history before he [leaves] office.”
He’s also not leaving on the same sort of universal high note as his predecessor, even though the economy has rebounded some from the depths of the crisis. “When Greenspan left, he was almost worshipped,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. “[Greenspan], in a way, didn’t have to make his case.”
“There’s more onus on [Fed officials] now to explain themselves,” O’Sullivan said. The central bank’s crisis-fighting record didn’t ingratiate it to Congress, members of which alternately chastised the Fed for being too meek or too overreaching in its actions during and after the 2007-2009 crisis. The House Financial Services Committee has pledged to spend the year examining the central bank and offering legislative changes; Sen. John Cornyn, R-Texas, and Rep. Kevin Brady, R-Texas, introduced legislation that would establish a commission to review the central bank. And Bernanke, like Greenspan, will have to answer for missing the signs of the looming crisis in his early days as Fed chair.
Bernanke has offered few clues as to what, exactly, he’ll do when he leaves the Fed. He said last month that he and his wife plan to stick around Washington “for a bit of time.” He joked to Princeton students as their commencement speaker in June that his leave from the university had expired and the university might not want him back.
Bernanke told reporters in December that he’d be “interested to see” what future monetary historians would say about him. “I hope I live long enough to read the textbooks,” he said.
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