TEXT OF INTERVIEW
Lisa Napoli: And now it's time to talk about Ben Bernanke. Maybe you tune out when the Federal Reserve chief does his regular de-brief on the Hill, as he did last week. But there are people out there who hang on his every word.
Eighteen months into his tenure as the nation's chief economist, I asked commentator Allan Sloan how Bernanke's doing, and whether it pays to listen more carefully.
Allen Sloan: There's this inflated idea in the world of the power of the Fed... this idea that the Fed controls all. And in reality — at least in the real world as opposed to the journalistic world — what the Fed has control of is a handful of important but short-term money market rates.
And one of the ways Greenspan kept enormous clout for the Fed — which I think was important the Fed had — was by masking his intentions. Because otherwise the markets will front-run you and pick your pockets.
Napoli: We had a caller last week who said that Bernanke is more important to the health of the country than the president. Now, you're saying you don't think the Federal Reserve is that important. Who's right?
Sloan: To be more important to the health of the economy than the president? That's probably true about Bernanke. But that's because I think the president has become more and more irrelevant.
I mean, the head of the Federal Reserve Board is important, but personally... You know, I can probably guess what the Fed does. I've looked at things for a year and said "Gee, given the way the United States government is borrowing all this money, and the way the currency is under attack, I find it very difficult to believe that the Federal Reserve Board can really drop short-term interest rates much." Because to do that would undermine the dollar and cause a lot of trouble.
Napoli: Does it matter if people who invest in the market feel confident in Ben Bernanke?
Sloan: I think the reason it matters some is you don't want people in the markets to think that the United States economy and the Federal Reserve Board are completely irrelevant and out of control. Because then that would end up hurting the country, hurting the currency and probably driving up interest rates. But I don't think the markets trust or distrust Bernanke —I think they just sit there and look for advantage and disadvantage to themselves.
Napoli: That's Fortune's senior editor at large Allan Sloan. In Los Angeles, I'm Lisa Napoli. Enjoy your day.