Power Play Profile: Ben Bernanke

What makes Big Ben tick?

No, not the clock in London’s Westminster Palace, and not the quarterback of this year’s Super Bowl champion Pittsburgh Steelers – but Ben Bernanke, chairman of the Federal Reserve Board of Governors. 

Even before last year’s financial meltdown and the ongoing financial crisis it ushered in, the Fed chairman was widely considered to be the second most powerful person in the nation after the president. 

Bernanke’s energetic response to the crisis, invoking emergency authority in unprecedented fashion to flood the economy with money, has vastly increased that power. 

Ben Shalom Bernanke, the second-generation descendant of Jewish immigrants from a corner of the Austro-Hungarian empire that now lies in Ukraine, is not really that big, slight of figure and much shorter than his predecessor Paul Volcker’s imposing 6 feet 7 inches. 

Nor did he give much indication before this crisis of the kind of resolve he has brought to bear in steering the Fed, the country and the world into uncharted waters. 

Bernanke pulled the veil aside, however, in a recent commencement speech at Boston College Law School. Addressing the graduates, he mused on the unpredictability of life, drawing on his own experience to illustrate his point. 

Wall Street Journal reporter Jon Hilsenrath called attention to the BC speech in a blog. “You won’t learn much about what the Fed will do next in this financial crisis,” he told his readers. “But you get a unique personal window into the Fed chairman’s mindset. The guy believes in testing one’s boundaries.” 

Bernanke is fulfilling his pledge for more transparency at the Fed by starting with himself. In March, he gave a long, personal interview to CBS’s 60 Minutes, a media exposure without precedent for a Fed chairman. Of course, it may also be a not-so-subtle campaign for reappointment as chairman when his four-year term expires in January. 

Barack Obama must decide in the next few months whether to keep Bernanke, who has another 10 years in his 14-year appointment as governor, in the chairman’s seat. Larry Summers, who had to accept a White House advisory post when Timothy Geithner was named Treasury Secretary, is widely thought to be a contender to replace Bernanke as chairman. 

Last month [May], Bernanke gave a luncheon interview to Washington Post columnist David Ignatius, earning a headline calling him a “quiet tiger” and an endorsement for reappointment. 

At the Boston College Law commencement, the second-most powerful person in the country started his personal narrative by saying, “We all have moments we will never forget.” One of his was when he entered Harvard Yard for the first time as a 17-year-old freshman. He arrived in Cambridge late on a Saturday night, he recounted. It had been a grueling trip for a young man from rural South Carolina who only knew that Harvard University was somewhere up north. 

He put down his two suitcases “with a thump,” he related, looked around at the historic old brick buildings covered with ivy, stereos blaring out of dorm windows from parties going full blast, and said to himself, “What have I done?” 

His mother, a former teacher, had opposed his going to Harvard, Bernanke told 60 Minutes’ Scott Pelley in the March interview. She was worried he wouldn’t have the right clothes. But, lured by a hometown friend who had gone to Harvard ahead of him, young Ben took the plunge. 

“In planning our own individual lives, we all have a strong psychological need to believe that we can control, or at least anticipate, much of what will happen to us,” Bernanke told the BC law grads. “But the social and physical environments in which we live, and indeed, we ourselves, are complex systems, if you will, subject to diverse and unforeseen influences.” 

As for many people, going off to college was pivotal event for the high-achieving class valedictorian. “At some level, I really had no idea what I had done, or what the consequences would be,” Bernanke said. “All I knew was that I had chosen to abandon the known and comfortable for the unknown and challenging. But for me, at least, the expansion of horizons was exactly what I needed at that time in my life.” 

One thing led to another. Young Ben ended up studying economics as a compromise between math and English. He became interested in monetary policy and went to neighboring MIT for a doctorate. Along the way, he met Anna Friedmann, his wife of 31 years, on a blind date. 

The rest is history – teaching at Stanford and Princeton before getting the call to Washington in 2002 to serve as a governor on the Fed board, chair the Council of Economic Advisers, and then to replace Alan Greenspan as chairman of the Fed at the beginning of 2006. 

Bernanke’s point is clear. “I think you will agree that the chain of events that began with my decision to go far from home for college and has culminated – so far – with the role I am playing today in U.S. economic policymaking is so unlikely that we could have safely ruled it out of consideration,” he said. 

His conclusion: “Any time that you challenge yourself to undertake something worthwhile but difficult, a little out of your comfort zone – or any time that you put yourself in a position that challenges your preconceived sense of your own limits – you increase your capacity to make the most of the unexpected opportunities with which you will inevitably be presented.” 

This is the philosophy of the person who last fall faced challenges as big any central banker in history. Bernanke’s personal narrative on “the inherent unpredictability of our individual lives and how one might go about dealing with that reality” ended with the surprises offered by his tenure so far. 

“You will not be surprised to hear that events since January 2006 have not been precisely as I anticipated, either,” he said with some understatement.

And what advice does a Fed chairman who resolved early in his tenure at the central bank that the Fed could not repeat the mistakes it made in ushering in the Great Depression 80 years ago? “So my advice to you is to stay optimistic,” he said laconically. “Things usually have a way of working out.”

Bernanke will no doubt have to heed his own advice in the coming weeks. He faces intense scrutiny from a Congress that is growing more concerned about what exactly the Fed is doing and why. Key lawmakers are skeptical about granting the Federal Reserve the authority to be the super regulator for the nation’s financial system, as proposed by the administration.

Larry Summers did not get the Treasury appointment in part because it would have been hard to get him through Senate hearings due to several controversial statements he has made over his career, including one about women’s genetic capability to be scientists that got him ousted from the presidency of Harvard.

Given the current mood in Congress, and Summers’ role in the Clinton administration in championing the deregulation now blamed for the crisis, it doesn’t seem like it would be any easier now to win Senate confirmation for the abrasive economist.

So it seems likelier than not that Big Ben will get a second term to follow through on the unprecedented policies he has embarked upon. Unless, of course, life takes one of those unpredictable turns.