Fed Policy

Helicopter Ben under fire from the ground

You know the American economy is in dire straits when the Federal Reserve chairman gets to play whipping boy for presidential candidates. GOP candidates Newt Gingrich and Mitt Romney made it clear this week they would not hesitate to shoot down “Helicopter Ben” Bernanke for his willingness to engage in what they see as overly accommodative monetary policy. In other words, if they somehow manage to become president, the head of America’s central bank gets an immediate pink slip, joining millions of others on the unemployment line. In moments like these, Bernanke probably misses the days when Fed chairs were relatively anonymous heroes for the geeky set. Those days ended with Bernanke’s predecessor; Alan Greenspan was Fed chief from 1987 to 2006. His monotone delivery in speeches and before Congress was the voice of the central bank for 20 years. Bernanke adopted that smart, dry verbiage and become adept at saying the same thing differently time and again. Despite walking in unfamiliar territory when it comes to the economy, Bernanke’s speech in Minneapolis Thursday sounded vaguely familiar, especially when compared to his recent presentation in Jackson Hole, Wyo. It was long on what is needed, but short on specific details. “Without significant policy changes to address the increasing fiscal burdens that will be associated with the aging of the population and the ongoing rise in health-care costs, the finances of the federal government will spiral out of control in coming decades, risking severe economic and financial damage,” Bernanke said. “But, while prompt and decisive action to put the federal government’s finances on a sustainable trajectory is urgently needed, fiscal policymakers should not, as a consequence, disregard the fragility of the economic recovery.” He said the Fed is prepared to use whatever tools it has to spur economic growth, which is something he’s said all year. Whether this means QE3 or something similar remains unknown, as Bernanke was mum on that point. But on Thursday he pointed to his Jackson Hole speech, saying it highlighted what tools are left in the Fed’s arsenal. When asked about dissent on the Federal Open Market Committee, especially on the issue of quantitative easing and accomodative policy, Bernanke replied: “There is a reason why there is a committee, and there are 19 people around the table to meet when we discuss monetary policy. If two people always agree, one of them is redundant. We have a committee to bring different points of view.” Write to: Kerri Panchuk.

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