Is the Federal Reserve above politics?
U.S. President Barack Obama (3rd R) shakes hands with Federal Reserve Bank Chairman Ben Bernanke (C) as FDIC Chair Sheila Bair (2nd L) looks on after Obama signed the financial reform bill into law during a ceremony at the Ronald Reagan Building and International Trade Center July 21, 2010, in Washington, D.C.
Kai Ryssdal: The ink was barely dry on the statement from the Federal Reserve today before it became the latest political prop of this presidential election season. Republican senator Bob Corker of Tennessee said Mr. Ben Bernanke is "beginning to do serious damage to the Fed as an institution."
I'll pause here to note that 11 of the 12 members of the Fed voted for the new policy. But as Marketplace's Nancy Marshall-Genzer reports, the Fed and presidential politics aren't exactly strangers.
Nancy Marshall-Genzer: The Federal Reserve is a creature of Congress, created on Capitol Hill almost a hundred years ago.
Stuart Hoffman is a former Fed economist, now at PNC Financial. He says Fed chairman started staking out their independence after World War II. But it’s always been a struggle.
Stuart Hoffman: They’re like a grown up adult. Your parents still try to influence you and give you good advice. But especially as you mature, you should do what you feel best.
And resist pressure from, say a president who wants you to juice the economy so he can get re-elected. Hoffman says former Fed chair Arthur Burns bent to that kind of pressure from President Nixon. But since then, our Fed chairman have been more independent.
Bob McTeer was president of the Dallas Fed during Alan Greenspan’s term. He says, remember Greenspan’s famous Fedspeak?
Alan Greenspan: Modest pre-emptive actions can obviate the need of more drastic actions at a later date.
McTeer says Greenspan was able to make everybody hear what they wanted to hear.
Bob McTeer: It was a defensive weapon. A shield, not a spear.
Cut to current chairman Ben Bernanke. He’s been the target of criticism from both sides of the political aisle. He was appointed by President Bush, then re-appointed by President Obama.
Alan Blinder is a Princeton economist and former Fed vice chair. He says the bipartisan carping has actually helped Bernanke.
Alan Blinder: The fact that he’s going to be dammed if he does and damned if he doesn’t, incrementally makes it easier to just do the right thing.
Even, Blinder says, right before a presidential election.
In Washington, I’m Nancy Marshall-Genzer for Marketplace.