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
Add to Briefcase
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.

What We're Following See More »
WWE WRESTLING OWNER
Trump to Nominate Linda McMahon to Head SBA
9 hours ago
THE LATEST
$6.3 BILLION FOR RESEARCH AND OPIOIDS
Senate Sends Medical Cures Bill to Obama’s Desk
14 hours ago
THE LATEST
HAD CONSIDERED RUNNING FOR GUV IN 2018
Oklahoma AG Pruitt to Get the Nod for EPA Chief
15 hours ago
THE DETAILS
TO BE ANNOUNCED IN COMING DAYS
Trump To Nominate Gen. John Kelly For Homeland Security
18 hours ago
THE LATEST

Donald Trump has chosen Gen. James Kelly to be his secretary of homeland security, making Kelly the third general tapped by Trump to serve in his administration. The official announcement is likely to come in the next couple of days. Kelly, who did not endorse Trump during the campaign, "was the commander of U.S. Southern Command until earlier this year."

Source:
EFFORT LIKELY TO DIE IN COMMITTEE
Jordan Can’t Force a Floor Vote on Impeaching Koskinen
1 days ago
THE LATEST
House Freedom Caucus Chairman Jim Jordan attempted to force a floor vote on impeaching IRS Commissioner John Koskinen, but "the House voted overwhelmingly to refer it to the Judiciary Committee. ... The committee will not be required to take up the resolution." Earlier, House Minority Leader Nancy Pelosi "made a motion to table the resolution, which the House voted against by a 180-235 margin, mostly along party lines."
Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login