The White House chief economic adviser, the president's choice to head the Federal Reserve after Alan Greenspan retires, sought to reassure investors and central bankers worldwide.
WASHINGTON – White House chief economic adviser Ben Bernanke pledged today to run the Federal Reserve independent of political influences, a promise aimed at reassuring investors and central bankers worldwide as well as the American public.
Bernanke, the president’s choice to head the Federal Reserve after Alan Greenspan retires, made his commitment in prepared remarks to the Senate Banking Committee, which is holding a hearing on his nomination.
“I assure this committee that, if I am confirmed, I will be strictly independent of all political influences and will be guided solely by the Federal Reserve’s mandate from Congress and by the public interest,” Bernanke told lawmakers.
He pledged to maintain “continuity” with Greenspan’s policies, saying it is a “top priority.” Bernanke also said he would move slowly and seek to build a consensus on the notion of inflation targeting — that is numerically spelling out acceptable bounds for inflation. That’s one area where Bernanke and Greenspan differ. Bernanke supports a numerical inflation target, Greenspan doesn’t.
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“I will take no precipitate steps” on inflation targets, Bernanke said. “This matter requires further study at the Federal Reserve as well as extensive discussion and consultation.”
Bernanke, if confirmed as expected, will take on the Fed at a time when the economy faces a number of challenges, including bloated budget and trade deficits, worries about whether the high-flying housing market will make a safe landing, fears about high energy prices and if they’ll feed inflation and concerns about the lackluster jobs market.
A former Princeton professor and Fed governor who now serves as chairman of the White House Council of Economic Advisers, Bernanke is expected to win the panel’s endorsement and get a positive vote in the full Senate.
Democrats, who questioned whether Bernanke would run the Fed fully independent from the Bush administration, were seeking assurances on this front.
“It is my expectation that the Fed chairman, even when he is a former White House adviser, refrains from being a cheerleader for the policies of either party,” said Sen. Tim Johnson, D-S.D.
Sen. Paul Sarbanes of Maryland, the top ranking Democrat on the panel, said, “The credibility of the Federal Reserve rests in large part on the independence of the judgment it makes. If that confidence were to be undermined, the stature of the fed would be diminished.”
The Senate fast track means Bernanke, 51, will be ready to take over as soon as Greenspan, 79, retires on Jan. 31 after 18-plus years at the helm.
The pace of Bernanke’s confirmation is evidence of the lack of controversy surrounding his nomination. By contrast, Judge Samuel Alito, the president’s nominee to succeed Sandra Day O’Connor on the Supreme Court, was nominated just a week after Bernanke but won’t even have a nomination hearing until Jan. 9.
While Greenspan has argued that inflation targets can restrain the Fed’s flexibility, Bernanke said that need not be the case. Bernanke also said it wouldn’t interfere with nurturing a good employment climate, one of the central bank’s missions along with making sure inflation remains low.
Bernanke also spoke about the importance to the economy of making sure inflation stays under control.
The choice of Bernanke, a leading economic thinker who has written extensively about the Great Depression, is seen as a safe one for Bush, whose job approval ratings are at record lows.
Senate Banking Committee chairman, Sen. Richard Shelby, R-Ala., hailed the nominee’s credentials, saying, “Dr. Bernanke may well be the finest monetary economist of his generation.”
The chief of the Fed wields enormous power over the economy and the portfolios of millions of investors large and small. The chairman carries much influence in shaping the Fed’s decisions on interest rates. His words can move markets.
Born in Augusta, Ga., Bernanke graduated from Harvard with an economics degree and added a Ph.D. in economics from the Massachusetts Institute of Technology. He spent six years teaching at Stanford’s Graduate School of Business, 17 years at Princeton and several years as a visiting faculty member at other institutions, including MIT.
“I always thought I would be an academic lifer,” he once said.