Ben Bernanke: the Federal Reserve's self-effacing champion of regulation | Heidi Moore

The Fed chairman's press conference proved quietly historic as Bernanke aligned his legacy with the cause of banking reform

Ben Bernanke, the chairman of the Federal Reserve, is unassuming. He has an academic beard and, no matter how well-dressed he is, his clothes always look nondescript. When he speaks during press conferences, his eyes get moist and his voice takes on a nervous, shaky tinge. He has been in the middle of crisis after crisis during his term, and yet, for the most part, he has faded into the background where more brash or foul-mouthed figures like former Treasury Secretary Tim Geithner came to the forefront.

Bernanke is so low-key, in fact, that one research report this year from the National Bureau of Economic Research suggested that the Federal Reserve would have been more aggressive on the economy if Bernanke weren't so shy. So it's easy to forget that Bernanke has quietly changed everything about the Federal Reserve.

That was highlighted Wednesday in the Fed chairman's first press conference of 2013. The press conference ended up being less about the economy – which is ho-hum and moving along – and much more of an insight into what Bernanke thinks about the role of a Fed chairman and how he has changed it.

Two reporters asked Bernanke about his plans after the Fed. He did say he had talked to the president but Bernanke remained vague; he archly told a Wall Street Journal reporter he'd give him a call when he decided on his next step.

Bernanke did say a few things that illuminated that this otherwise closed-off man may be thinking more carefully about how history will evaluate his time overseeing – and forever changing – the Federal Reserve and the nation's financial system. In fact, Wednesday's press conference, which seemed boring in the context of economic news, was a watershed moment for showing some unaccustomed public introspection from Bernanke.

For the first time, we heard Bernanke compare his views to not one, but two previous Fed chairmen: Alan Greenspan and Paul Volcker.

The Greenspan comparison was the most startling because it was the most pointed. When asked how the Fed would go on without him, Bernanke said, in essence, that he wasn't a magician, and that the Fed would easily survive his departure. He said he had worked to make the Fed more transparent as an institution and he had worked to reduce the Fed's previous reliance on "personality" to communicate.

This was a none-too-subtle swipe against the disastrous Cult of Alan Greenspan, in which the press relied almost entirely on one man to get their read of the economy. Greenspan was, in the words of NPR, more recognizable than Justin Timberlake, back in the 1990s.

Bernanke, since taking over the Fed in 2006, has reversed that. Especially in recent years, he has recast the Fed as more collaborative: less an autocratic empire and more of a democratic senate. Bernanke has made the Federal Reserve board's votes and opinions open so that anyone can see that there is not one economic plan handed down on stone tablets from a single prophet, but instead, the result of lively debate. This wasn't all humility: Bernanke is still a shrewd political operator who distanced himself from former Treasury Secretary Tim Geithner when Geithner was being blamed for being too friendly to banks.

Bernanke, an economic historian, is also used to taking the long view. He must also know it won't do for him to get blamed for everything if history is unkind later.

Still, this show of humility – Bernanke's somewhat hard-to-believe implication that there are many potential capable leaders of the Federal Reserve – also served Bernanke's self-effacing, technocratic reputation as someone who doesn't care about the spotlight. (He didn't mention, naturally, that the spotlight, during his time, has generally been an ugly place to be.)

That wasn't Bernanke's only attempt at putting his own views in the context of Fed history. Bernanke also compared himself to Volcker, when talking about the US banking system, which the Fed regulates. Volcker once said, famously, that the only great financial innovation of recent decades was the invention of the automated teller machine. Bernanke smiled as he quoted Volcker's bellicose quip and said he wouldn't go that far – but he was surprisingly frank in talking about the failures of the financial system and regulation.

"['Too big to fail'] is not solved and gone. It's still here," he said, emphasizing the point. He also threw in his lot with Elizabeth Warren, who often opposed Tim Geithner and others in her insistence that banks are of a dangerous size:

"I agree with [Warren] 100% that ['too big to fail'] is a real problem … We will not have successfully responded to the crisis if we do not address ['too big to fail'] successfully."

That view is consistent with what Bernanke said as far back as 2009. But the subject of "too big the fail" has been a nonstarter for at least a year, since Occupy Wall Street protests receded.

Bernanke also took an activist view of sorts by plumping for a return to regulatory reform and advocating that banks need to pay higher surcharges to help the country bail them out if things go wrong. Then Bernanke criticized banks again, implicitly, by saying that they had restricted lending too much, making it hard for ordinary Americans to get a mortgage.

He went on to say that the Fed's bond-buying program has been successful largely because the Fed has learned how to monitor the markets better – implying, correctly, that those trading on Wall Street need a regulator to keep an eye on them. All of this was surprising on two fronts: first, that Bernanke actually shared his own opinion, instead of a technocratic, non-committal vague fluttering of economic opinions, as is often the case. Second, it's surprising that he took a somewhat controversial view, not designed to make friends on Wall Street.

And that, in fact, may be the most important development of this first press conference of 2013: we already know Ben Bernanke is a savvy politician who knows how to read a room. If Bernanke has thrown his lot in with those who have said that Wall Street needs to come under tighter control, you can be sure that he thinks it's a historically smart view to take. Those who are against reform should take notice.

As for Bernanke's legacy, that is still a work in progress. But he knows now how lucky he is, compared to his European brethren. When several people asked him about Cyprus, he gave a similar answer to all of them: that it was difficult, that Cyprus is complicated, and, most of all, that he was glad it was not his problem.

Bernanke knows that his legacy lies in the US financial system. So don't be surprised if he keeps talking about how we need to change it.


Heidi Moore

The GuardianTramp

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