Bernanke: Fed Must Avoid Greenspan Errors

Thursday, January 17, 2008 | 06:50 AM

Well, its a start:

Federal Reserve Chairman Ben S. Bernanke may encourage lawmakers today to stimulate the economy while aiming to avoid his predecessor's "regret'' of being tied to specific measures.

Legislators will question the Fed chief on steps to avoid the first recession since 2001 when he testifies to the House Budget Committee in Washington. Bernanke told members of Congress this week that some kind of fiscal stimulus is needed, according to Democratic lawmakers.

Former Chairman Alan Greenspan "misjudged'' the environment in which he endorsed tax cuts in 2001, and had "intense'' regret the eventual legislation excluded his specific guidance, he wrote in his 2007 book. Bernanke will try to avoid backing any particular tax or spending policies because doing so could earn criticism from legislators who oppose them, putting the Fed's reputation for independence at risk, analysts said.

Now if we can get the Fed to avoid the Greenspan policy of inflating our way out of every situation to the detriment of those who suffer from inflation, we will be making some progress.

Note that the major coverage of these Fed Chair comments misses the subtext of what Bernanke was implying (though Bloomberg came the closest):  "Greenspan f&^%ed up! He compromised the Fed's independence for partisan reasons, and damaged the Fed's reputation. I won't make that mistake."

In this coming Sunday's NYT Magazine is a long piece by Roger Lowenstein titled   The Education of Ben Bernanke, and I suspect it will be required reading. (I already picked out a cigar and some scotch for that very purpose).

I already spied this wonderful quote from former Fed Chair Paul Volcker: :

“I think Bernanke is in a very difficult situation,” Paul Volcker told me. Volcker was the Fed chief who preceded Greenspan and who conquered, painfully, the great inflation of the 1970s and early ’80s. (He was chairman from 1979 to 1987.) “Too many bubbles have been going on for too long,” Volcker added. “The Fed is not really in control of the situation."

Note that when it comes to enjoying low inflation rates, Volcker is the man who was most responsible.    should get credit. Truth be told, both the 80's Ronald Reagan boom and the 90's Bill Clinton boom were benefactors of Volcker's Fed. He broke rampant inflation, and the next 20 years of falling interest rates were the direct result of his policies.

When you compare the situation Greenspan inherited with the one Bernanke got stuck with . . .

UPDATE: January 17, 2008 11:45am


Chairman Ben S. Bernanke
The economic outlook
Before the Committee on the Budget, U.S. House of Representatives


The Education of Ben Bernanke
NYT,  January 20, 2008

Bernanke Aims to Avoid Greenspan's Stimulus `Regret'
Scott Lanman
Bloomberg, Jan. 17 2008

Bernanke Likely to Support Stimulus Effort
WSJ, January 17, 2008; Page A2

Bernanke Is Said to Support Stimulus Measures
NYT, January 17, 2008

Thursday, January 17, 2008 | 06:50 AM | Permalink | Comments (39) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



TrackBack URL for this entry:

Listed below are links to weblogs that reference Bernanke: Fed Must Avoid Greenspan Errors:


I gotta give credit to the bears on this one.

I do think that FED knew all along the problems of the housing and Credit crunch, but there was no room for them to do anything. hence they thought maybe optimism will keep the populace from cutting spending.

which means, even now the FED may not have much room, except cutting the rate and pumping liquidity.

btw i did notice that the mortgage rates are falling, which will be able to ease the housing pain a lot.

and since libor rate has eased too, credit crunch may also get better.

frankly i dont have too much expectations from politicians to solve economic problems, they want something to appease the masses....its an election year....what better than some free money in form of "Tax rebate"...

the price we have to pay for democracy and free market....i hope we will have a better system one day, when humans will be out of the equation..

Posted by: techy | Jan 17, 2008 7:17:56 AM

The comments to this entry are closed.

Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      


Complete Archives List



Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:

Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo



Odds & Ends

Site by Moxie Design Studios™