The Education of Ben Bernanke (Part 3)

Why hasn’t Bernanke been more assertive about easing monetary policy?

Some have pointed to the Chairman’s natural diffidence and shyness as a reason. But that seems a stretch. If anything the Chairman’s role has become more prominent in recent years. These aren’t the actions of a shy person.

No, Bernanke has made significant changes in the way the Fed operates—and that shows a third reason why Ben Bernanke has been less of a dove: he has had to pick his fights. Greenspan helmed the Fed for almost 25 years; when he left the institution had evolved to reflect his personality. This necessarily had to change. But if leaders try to change too much, too soon they alienate the very people necessary to bring about the changes.

So it may be that Bernanke has been less assertive about monetary policy while he focuses on transforming the Fed’s insular culture. The Chairman has instituted press conferences; he’s gone on national television; he’s allowed more dissent from Fed actions. The Fed’s institutions have changed pretty dramatically. In some ways, this is more critical than the level of interest rates: the way the Fed goes about its business will affect a lot more than this month’s FOMC meeting.

As Chairman, Bernanke has transformed the way the Fed makes decisions. It’s less insular and more collaborative. But he can only change so many things at once. Ben Bernanke’s education isn’t just what he’s learned. In this case, it’s also what he’s teaching. After all, he is a professor.

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