Dissention-Supporting Bernanke Asked for Message Unity in Crisis

1,500 pages of transcripts from the Fed’s 2008 meetings show the Fed chief wanted central bankers to get on board.

WASHINGTON, DC - MARCH 22: Federal Reserve Board Chairman Ben Bernanke lectures at George Washington University March 22, 2012 in Washington, DC. Bernanke is taking part in a series of four classes at the university on the role of the Federal Reserve in central banking. (Photo by Win McNamee/Getty Images)
National Journal
Catherine Hollander
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Catherine Hollander
Feb. 23, 2014, 7 a.m.

Ben Bernanke has been praised for en­cour­aging his Fed­er­al Re­serve col­leagues to air some­times-con­tra­dict­ory views pub­licly. But in late 2008, a year that can po­litely be de­scribed as tu­mul­tu­ous for the eco­nomy as a whole, the Fed chair­man wanted cent­ral bankers on board with a single mes­sage.

“Giv­en the state of con­fid­ence in the mar­kets and in the eco­nomy, I hope whatever dis­agree­ments we may have that as much as pos­sible we can keep them with­in these walls,” Bernanke said, ac­cord­ing to a tran­script from the Fed policy-set­ting com­mit­tee’s Decem­ber 2008 meet­ing, re­leased Fri­day after a five-year lag.

That month, Fed of­fi­cials de­cided to cut the fed­er­al funds rate to zero in an at­tempt to boost eco­nom­ic activ­ity. From then on, the cent­ral bank would have to rely on oth­er un­con­ven­tion­al and nev­er-used meas­ures to shore up growth as the eco­nomy crumbled around them.

Fed staff wor­ried that when the in­terest rate was cut to zero, the press would re­port that the cent­ral bank had “run out of am­muni­tion,” something that could un­der­mine the Fed­er­al Open Mar­ket Com­mit­tee’s mes­sage that it was still able to provide stim­u­lus.

Bernanke sug­ges­ted that Fed of­fi­cials “come to­geth­er and de­cide what policies we want to pur­sue and then col­lect­ively take re­spons­ib­il­ity for those policies and com­mu­nic­ate them in a co­her­ent and con­sist­ent way to the broad pub­lic.”

Richard Fish­er, head of the Dal­las Fed, con­curred: “If we’re go­ing to sell something, we have to sell it by re­peat­ing it, not ask­ing the press to in­ter­pret it for us,” he said.

“One of my col­leagues of­ten says that, if you’re Elton John, you are ex­pec­ted to sing ‘Ben­nie and the Jets’ every single time and at every single con­cert. It seems to me that, once we get and hone our mes­sage, we must re­peat it in­cess­antly and stay on mes­sage in or­der to have it pen­et­rate,” he said.

Fed of­fi­cials dis­cussed at the Decem­ber meet­ing some of the com­mu­nic­a­tions strategies it has since ad­op­ted, in­clud­ing hold­ing quarterly press con­fer­ences with the chair­man. Bernanke held the first news con­fer­ence in April 2011. They also con­sidered ad­opt­ing a long-term in­fla­tion tar­get, a step the Fed took in Jan. 2012.

The un­con­ven­tion­al steps the Fed has taken since Decem­ber 2008 in­clude three rounds of large-scale as­set pur­chases, known as quant­it­at­ive eas­ing. The Fed began to un­wind the cur­rent, open-ended round in Decem­ber 2013; it is now buy­ing $65 bil­lion worth of Treas­ury and mort­gage-backed se­cur­it­ies each month.

The Decem­ber 2008 meet­ing tran­scripts were part of a lar­ger bundle of tran­scripts re­leased from the cent­ral bank’s meet­ings that year that provide a closer look at how the Fed was read­ing the data com­ing in and de­bat­ing its re­sponse to an in­creas­ingly dark eco­nom­ic pic­ture.

Sim­il­ar tran­scripts from the Fed’s meet­ings in 2007 showed poli­cy­makers strug­gling to un­der­stand the crisis un­fold­ing around them.

The Fed typ­ic­ally re­leases minutes from meet­ings, which provide only a gen­er­al over­view of the dis­cus­sion and do not af­fil­i­ate people with their po­s­i­tions, with a three-week lag. The much-more de­tailed tran­scripts are re­leased five years later.

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