Chairman of the Federal Reserve
B orn Benjamin S. Bernanke, December 13, 1953, in Augusta, GA; son of Philip (a pharmacist and theater manager) and Edna (a teacher) Bernanke; married Anna Friedmann, May 29, 1978; children: Alyssa, Joel. Education: Harvard University, B.A., 1975; Massachusetts Institute of Technology, Ph.D., 1979.
Addresses: Office—c/o Federal Reserve Board, 20th St. and Constitution Ave., NW, Washington, D.C. 20551.
A ssistant professor of economics, Stanford University, 1979-83; associate professor of economics, Stanford University, 1983-85; professor of economics and public affairs, Princeton University, 1985-96; Howard Harrison and Gabrielle Snyder Beck professor of economics and public affairs and chair of the economics department, Princeton University, 1996-2002; served on the Federal Reserve System’s Board of Governors, 2002-05; chairman of the President’s Council of Economic Advisors, 2005-06; Chairman of the Federal Reserve, 2006—.
Awards: Allyn A. Young Prize for best undergraduate honors thesis in economics, Harvard University, 1975; John H. Williams Prize for outstanding Harvard senior majoring in economics, Harvard University, 1975; Graduate Fellow, National Science Foundation, 1975; Hoover Institution National Fellow, Hoover Institution of Stanford University, 1982-83; Research Fellow, Alfred P. Sloan Foundation, 1983-84; fellowship, John Simon Guggenheim Memorial Foundation, 1999.
B en Bernanke was selected as the Chairman of the Board of Governers of the Federal Reserve in 2006, filling the shoes of former Chairman Alan Greenspan. His appointment was met with a market surge, reflecting the confidence many economists felt at his appointment to what is arguably one of the most powerful positions in the United States government. Given the 19year legacy of Greenspan, Bernanke has often been compared to the former chairman, both positively and negatively, as his ideas about inflation targeting and his dedication to speaking plainly and making the Federal Reserve—also known as the Fed or the Federal Reserve System—less obscure run counter to the previous administration.
Bernanke was born on December 13, 1953, in Augusta, Georgia, and grew up in Dillion, South Carolina. His parents, a pharmacist and a teacher, encouraged Bernanke’s education early on. By the age of three, he could add and subtract; he learned to read as a kindergartener and skipped the second grade. At the age of 12, he won the South Carolina spelling bee and went on to compete in the national competition. As a teen, Bernanke assisted rabbinical students in offering services for the small Jewish community in Dillon, South Carolina. In high school, he taught himself to speed read and learned calculus on his own, since it was not offered at his school; in 1971, he earned the highest scoring Scholastic Aptitude Test score of the year in South Carolina, earning 1,590 out of a possible 1,600 points. An avid fan of baseball, Bernanke became interested in statistics, and developed a dice-based baseball game. He was the valedictorian of his graduating class.
Bernanke attended Harvard University for his undergraduate degree in economics, which he earned summa cum laude in 1975. To help support himself through college, he worked at various jobs, including as a waiter at a South of the Border restaurant and as a construction worker. After graduating, he attended the Massachusetts Institute of Technology, where he earned his Ph.D. in economics in four years. His dissertation focused on the Great Depression, an era that particularly fascinated Bernanke. In the Wall Street Journal, Bernanke was quoted as having said, “If you want to understand geology, study earthquakes. If you want to understand economics, study the biggest calamity to hit the U.S. and world economies.” Newsweek reporters Daniel McGinn and Richard Wolffe quoted another of Bernanke’s comments about his interest in the era: “I guess I am a Great Depression buff, the way some people are Civil War buffs. To understand the Great Depression is the Holy Grail of macroeconomics.” The paper criticized the Fed’s failure to keep the banks steady after the stock market crashed in 1929, and earned Bernanke attention throughout academic circles.
As an academic, Bernanke taught at both Stanford and Princeton, where he became known for his spirit of teamwork inside his department. As the chair of the Department of Economics at Princeton, he was known for a sense of equality with his peers, engaging all members of the department as contributors to the team. In what is usually a competitive academic environment, Bernanke earned “almost universal admiration from colleagues, both for his intellectual prowess and for his personable manner,” Tom Buerkle wrote in Institutional Investor International Edition.
“What sets Bernanke apart from many other academic economists is his ability to forge consensus,” wrote Rich Miller and Richard S. Dunham in an article for BusinessWeek. Along with focusing on team dynamics in his department at Princeton, Bernanke also made efforts to build a sense of collaboration on the Montgomery Township school board, which was his first public position. That position gave him experience in dealing with both angry parents and angry taxpayers. “I learned something, I think, about public service, about working with other people, and dealing with sometimes emotional or otherwise highly charged issues,” he told U.S. News and World Report.
That his only public position had been as a school board member made him a surprising candidate for the Federal Reserve’s Board of Governors. While serving as a governor, Bernanke became known for his outspoken concerns on deflation and his ideas on how the Fed should counter it. He was also noted for his congenial relationship with Fed staffers and aides, asking questions about data and their analyses. Chairman Alan Greenspan would often jump in with his own explanation and, while Ber-nanke would listen, he would tend to follow Greenspan’s thoughts with, “Be that as it may I’d still like the staff to get back to me,” according to Miller and Dunham in BusinessWeek. Bernanke did not challenge Greenspan, but continually requested additional information and sought differing views in order to develop a more complete understanding of economic situations.
In 2005, Bernanke left the Board of Governors to become Chairman of the President’s Council of Economic Advisors. Within a year of being named to that position, President George W. Bush nominated Bernanke for the position of Chairman of the Board of Governors when Greenspan announced his retirement. Atypical of most nominations, both Democrats and Republicans were largely pleased, in part because Bernanke kept his own political opinions quiet. “I didn’t know he was a Republican until he got appointed to the Fed,” Cornell economist Robert Frank, who had written papers with Bernanke, told Buerkle in Institutional Investor International Edition. In the same article, Edward Gram-lich, an economics professor at the University of Michigan and former Fed governor, called Bernanke “very nonpolitical.”
Not only was Washington enthusiastic about Bernanke’s appointment, but the market itself seemed to take a positive stance. As Newsweek contributors McGinn and Wolffe noted, “Economists applauded the choice, the stock market rose, and even in partisan Washington, it was hard to find anyone who disapproved.” Bernanke announced in his acceptance of the nomination, as quoted by National Public Radio’s Morning Edition, that he intended to maintain the “standard for excellence in economic policy-making” that Greenspan set while in office, but it was quickly obvious that Bernanke intended to make some changes in the way things were run. The first difference, and possibly the one that made Bernanke Bush’s choice as Greenspan’s replacement, was Bernanke’s commitment to transparency. Bush was quoted on Morning Edition as saying of Bernanke, “His speeches were widely admired for their keen insight and clear, simple language.” N. Gregory Mankiw, a Harvard professor who formerly held Bernanke’s position on the President’s Council of Economic Advisors, told Newsweek, “Some academics find it hard to leave academia and talk more broadly, but Ben is so tremendously articulate.” This attitude went directly counter to the precedent set by Greenspan, who was known for his obscure comments. He once quipped, according to Daniel Kadlec in Time, “If I seem unduly clear to you, you must have misunderstood what I said.”
Bernanke has also taken the stance that the best strategy for fighting inflation is a predictable approach. While a Fed governor, he proposed selecting a target rate for inflation, letting investors, media, and the market know that when inflation fell below three percent, for example, the Fed would raise it, and if it went above, they would lower it. Greenspan long rejected this strategy, feeling that it would not allow for the flexibility necessary to manage spikes in prices due to natural disasters or other short-term occurrences.
Despite these ideological differences, the president of the Federal Reserve Bank of New York, Tim Gei-thner, expressed to Maria Bartiromo of BusinessWeek that he anticipated most policies to carry through from Greenspan to Bernanke. “I suspect that even though the way the meetings are run will change, you will see continuity in policy,” Geithner said. He continued, “Ben is a champion of transparency in monetary policy, but he also recognizes that there are limits to what we know about the economic forecast and what that means to monetary policy. And he understands that we can’t give the markets more clarity about the forecast or about future policy than we have ourselves.”
Supporters of Bernanke were quick to emphasize his expertise after he was selected as Greenspan’s replacement. “He combines a deep understanding of monetary theory with broad policy experience,” wrote BusinessWeek contributor Robert J. Barro. David Wyss, chief economist of Standard & Poor’s, told an interviewer for BusinessWeek Online, “Ber-nanke has probably the best academic qualifications for chairman in Fed history,” and called Bernanke “one of the leading experts in monetary theory.” Wyss went on to say, “If Bernanke has a weakness, it’s his inexperience in practical finance, since he hasn’t been in the private sector, and his tenure at the Fed board was relatively brief.” But while Ber-nanke quickly gained praise, others noted that the bond market in the United States weakened upon the announcement of Bernanke’s appointment. Representatives from Baring Asset Management felt “Bernanke’s reign could bring further volatility to U.S. inflation,” according to an article in Money Marketing. U.S. News & World Report contributor Paul J. Lim summed up the public doubts, writing, “There’s a growing feeling among market mavens that Bernanke, despite widespread support evidenced by the market’s strong rally the day of his appointment, still needs to build up immediate credibility in his first few months in office.”
Upon reaching the six-month mark in office, it was obvious that the economy was in transition, something Bernanke told members of Congress. According to Barbara Kiaviat of Time, the economy was not the only thing changing: “The Fed itself is feeling the Bernanke effect,” Kiaviat wrote. “Listening, mulling, debating, airing opinions of all stripes that style is spilling over into the way economists at the Fed communicate as they forge the nation’s monetary policy.” But while the clarity of communication made an impact and positive impression on most, Bernanke had to learn to manage his bluntness, watching one comment make the market soar, and then watching it fall again when he corrected the assumptions investors had made. Other transitions in the economy were not so easy to pinpoint, and Bernanke and the Fed have struggled to find out why the housing market is continuing to decrease when other consumer prices are increasing. In late 2007, the Fed dropped interest rates in an effort to stave off the recession that Bernanke felt to be threatening, and while some economists felt the gambit would work, others worry changing the focus from “fighting inflation to preventing panic,” as Robert J. Samuelson described it in Newsweek, might not be the right decision.
Despite the seriousness of his position, Bernanke enjoys playing basketball or rooting for his favorite baseball team—the Boston Red Sox—in his spare time. He has also made an effort to change clothing trends. “My proposal that Fed governors should signal their commitment to public service by wearing Hawaiian shirts and Bermuda shorts has so far gone unheeded,” Miller and Dunham quoted Ber-nanke as saying in BusinessWeek. When jokingly criticized by Bush for wearing tan socks with a dark suit, Bernanke responded by presenting Vice President Dick Cheney and others in the administration with tan socks of their own.
In a speech that Bernanke delivered to the National Economists Club, he described the difficulties of predicting economic trends. “If making monetary policy is like driving a car,” he said, “then the car is one that has an unreliable speedometer, a foggy windshield, and a tendency to respond unpredictably and with a delay to the accelerator or the brake.” Bernanke lives with his wife, Anna, and their children, Joel and Alyssa, in Washington, D.C.
BusinessWeek, November 7, 2005, p. 36; November 7, 2005, p. 146; May 15, 2006, p. 110.
Institutional Investor International Edition, November 2005, pp. 7-8.
Money, August 1, 2003, p. 55.
Money Marketing, November 3, 2005, p. 26.
Newsweek, November 7, 2005, p. 54; October 1, 2007, p. 39.
Time, November 7, 2005, p. 49; July 31, 2006, p. 54.
U.S. News & World Report, December 29, 2003; November 7, 2005, p. 59; November 7, 2005, p. 66.
Wall Street Journal, December 7, 2005.
“Analysis: Bernanke Chosen to Succeed Fed’s Greenspan,” NPR’s Morning Edition,http://www.npr.org/templates/story/story.php?storyId=4973231 (March 12, 2008).
“Answers About Bernanke,” BusinessWeek Online,http://www.businessweek.com/investor/content/oct2005/pi20051024.tif_7872_pi015.htm (March 12, 2008).
—Alana Joli Abbott