Bernanke Cements His Changes to the Fed
In his six years as chairman of the Federal Reserve, Ben Bernanke has stretched the central bank in once-unthinkable ways--pushing short-term interest rates to near zero and keeping them there for years, more than tripling the size of its securities and loan portfolio, rescuing financial firms that the Fed doesn't even regulate.</br></br>Lost in the glare of these radical actions is how much he has changed the institution itself. Under his leadership, the Fed has become more open about its plans for the economy and its own sometimes-divisive internal debates. Mr. Bernanke also has made the institution more consensus-oriented even as he assertively pushed the Fed into uncomfortable places. Last week's moves by the Fed were vintage Bernanke in all of these respects and will have long-lasting effects on how the central bank operates.</br></br>The Fed took two steps. First, it published detailed interest-rate projections of each of the 17 officials who participate in policy meetings, without identifying the officials by name. Second, it spelled out its goals for inflation and unemployment more explicitly than it has before.</br></br>The first step--publicizing the wide-ranging views inside the Fed of where people believe interest rates should go--effectively gives voice to the larger committee in which the Fed chairman operates. It was another example of the chairman trying to show he leads by consensus.</br></br>Mr. Bernanke is a believer in research by Alan Blinder, a Princeton professor and former Fed vice chairman, which has shown that groups are often more effective at decision making than individuals. Mr. Bernanke's predecessors--Alan Greenspan, Paul Volcker and Arthur Burns--ruled more by individual force. Mr. Bernanke took over the Fed in 2006 wanting to change that.