I’m all in favor of us plain old citizens getting some idea of what our government is doing. But I’ve got a really bad feeling about Fed Chairman Ben Bernanke’s plan to make the Fed more “transparent” by holding four news conferences a year. It sounds great, but I think Bernanke will come to regret descending into the journalistic scrum on a regular basis. The idea is to make the Fed seem less aloof and less elitist, and to try to build up political support against the political onslaught being led by supposed “populists” who want to get the Fed to follow their doctrines, as opposed to acting independently by doing what it thinks is right — as a central bank should.
But I think holding regular news conferences will turn the Fed chairman into just another talking head in a world already overrun with them. As things stand now, the Fed chief answering questions during a financial crisis, or going on 60 Minutes (as Bernanke has done twice) attracts a lot of attention. It lets the chairman make his points, have an impact and get off the stage. Once these public appearances become routine, their scarcity value will disappear. It probably won’t take long for them to turn into gaffe-seeking sessions, with questioners trying to get Bernanke to look angry or foolish, or to say something really dumb.
Although this risks having me tarred with the E (for “elitist”) word, I think the Fed is better off with less exposure. That way, people will continue to think that the Fed is more knowledgeable, powerful and organized than it really is.
Because I began writing about the Fed without having any access, I realized quickly that the Fed gods that many of my news media colleagues worshipped had feet of clay. The Fed would sometimes follow financial markets rather than lead them. It would get monetary policy wrong. And then there are the whoppers, such as former chairman Alan Greenspan thinking derivatives made the financial system safer, or Bernanke insisting until way late in the game that the mortgage problem would be easily contained.
The Fed has two huge advantages over other government institutions. First, it retains at least some mystique. Second, it sets its own budget and doesn’t have to grovel to politicians for money. The Fed is insanely profitable, because it can create money out of nothing and use it to buy interest-bearing securities. That’s how it made $82 billion last year. I’d hate to see the Fed tailor its policies so they’ll sound good at the chairman’s quarterly news conferences.
It may sound silly for me to worry about the Fed’s well-being. But as things stand now, it’s the only part of the government that seems capable of taking quick economic action.
Even if you’re dubious, as I am, about the Fed’s program of printing dollars and slowly debasing them — the effect of what the Fed calls quantitative easing — at least the Fed was able to do something dramatic and quick to try to stimulate the economy. Meanwhile, Congress and the administration seem immobilized by talk, politics and games. Other central bankers — including the European Central Bank and the Bank of England — hold frequent news conferences. But it just feels unseemly for the Fed, the world’s most powerful central bank (albeit less powerful relative to markets and other central banks than when the U.S. economy and currency were more dominant), to be trying to kiss up to the public.
I don’t think the more-transparency strategy is going to work in the long run, and maybe not even in the medium run. The people who dislike the Fed for ideological or policy-making reasons aren’t going to change their minds because of Bernanke’s news conferences. Neither are the millions of people who feel screwed-over economically and want someone to blame.
So good luck, Ben. If you can survive giving testimony in Congress, you know all about dealing with foolish questions.
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