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New fed reserve pick noted for great depression work { October 24 2005 } Original Source Link: (May no longer be active)
http://today.reuters.com/business/newsarticle.aspx?type=tnBusinessNews&storyID=nN24441428http://today.reuters.com/business/newsarticle.aspx?type=tnBusinessNews&storyID=nN24441428
NEWSMAKER-Monetary expert Bernanke set to be Greenspan heir
Monday 24 October 2005, 3:27pm EST
By Tim Ahmann
WASHINGTON, Oct. 24 (Reuters) - Ben Bernanke, U.S. President George W. Bush's pick to succeed retiring Federal Reserve Chairman Alan Greenspan, commands wide respect in the economics community and has long been the insiders' choice to lead the U.S. central bank.
The vocal backer of formal inflation targets to guide interest rate policy, who has joked that the only downside of working at the Fed was having to wear a suit, wore a trim one on Monday when he pledged to maintain the continuity of the Greenspan era.
Head of Bush's Council of Economic Advisers since June, Bernanke, 51, served on the Fed Board for nearly three years, gaining practical policy experience to complement his earlier theoretical work as an academic.
He has advocated more open Fed communication and succeeded in moving the central bank forward on that front while there.
Both before and after joining the Fed, the independent-minded economist argued the central bank could cement its inflation-fighting credibility by putting a number on price stability, a step the Greenspan has opposed as making the Fed less nimble.
"He's got strong research credentials on both analytical work and economic history and clearly his service at the Fed has familiarized him with a lot of the nuts and bolts of the job," said Michael Prell, former director of research at the Fed Board. "He's shown himself to be a student of the practical tasks of current analysis and forecasting."
Bernanke, who chaired the economics department at Princeton University before joining the Fed Board, caught financial market attention when he voiced concern over deflation risks in late 2002 and laid out a number of unusual options the Fed could use to combat that threat.
While many inflation-targeting proponents are viewed as inflation "hawks," Bernanke's focus on the dangers of deflation while at the Fed makes him tough to pigeonhole, analysts said.
"He's eminently reasonable. He'll react to the situation, but he'll maintain a long-term focus on price stability," said Mark Gertler, chairman of the economics department at New York University and a long-time Bernanke associate.
Bernanke also supports the use of forward-looking language in the central bank's announcements on interest rate policy. He has said this would improve the effectiveness of policy by influencing the long-term interest borrowing costs the Fed does not directly control.
"To the extent that central bank talk provides useful guidance to markets about the likely future path of short-term interest rates, policy-makers will exert greater influence over the longer-term interest rates," Bernanke said a year ago.
Earlier this year, Bernanke said a "glut" of foreign saving lay behind the record gap in the U.S. current account, an argument that quickly became touchstone in a debate among economists over global economic imbalances. In the same vein, he expressed optimism that global trade and investment imbalances could be resolved without crisis.
Like Greenspan, he believes the Fed is better off focusing on the broad economy than trying to sway asset prices even in the face of building bubbles, and has voiced support for efforts to toughen regulation of mortgage-market giants Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research).
In addition, he has said the Fed should allow banks to fail, except when the wider financial system is in peril.
Bernanke, who was born Dec. 13, 1953, and is married with two children, received his bachelor's degree from Harvard and his doctorate from the Massachusetts Institute of Technology. He taught at Stanford University before joining Princeton's faculty.
An expert on the Great Depression, Bernanke co-authored a popular economics textbook and chaired the panel charged with dating U.S. economic expansions and recessions at the prestigious National Bureau of Economic Research.
© Reuters 2005. All Rights Reserved.
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