Bush Taps Alum For Federal Reserve

Ben S. Bernanke ’75, President Bush’s top economic adviser, was tapped yesterday to replace Alan Greenspan as chairman of the U.S. Federal Reserve Board.

Bush, who made the announcement shortly after 1 p.m. in the Oval Office, offered high praise for the former Winthrop House resident.

“Ben Bernanke is the right man to build on the record Alan Greenspan has established,” Bush said, praising the nominee’s “record of excellence as both an academic and policy maker.”

Bernanke is currently the chairman of the White House Council of Economic Advisers and formerly served as a governor of the Federal Reserve and as chair of Princeton University’s economics department.

He said in remarks following Bush’s speech yesterday that he would aim to “ensure the continued prosperity and stability of the American economy,” according to a transcript of the event on the Washington Post’s website.

Bernanke also affirmed that he would not immediately undertake any major policy changes at the Federal Reserve if the Senate confirms him for the post. Greenspan’s term ends on Jan. 31.

“Our understanding of the best practice in monetary policy evolved during Alan Greenspan’s tenure at the Fed and it will continue to evolve in the future,” Bernanke said. “However, if I’m confirmed to this position, my first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years.”

One of the most visible changes in economic policy that Bernanke could push as chair is inflation targeting, a policy under which the Federal Reserve openly states a specific inflation rate that it hopes to achieve. The Federal Reserve’s current policy attempts to keep inflation low, but not at a specified level.

“Bernanke is in favor of inflation targeting,” said Nobel Laureate Robert M. Solow ’44-’47, an Institute Professor Emeritus at MIT who taught Bernanke as a graduate student there. “Greenspan was always against that.”

“I think the big difference between them as central bankers will be that Greenspan was Mr. Flexibility and Ben Bernanke is more likely to state a position and stick with it,” Solow added.

Morris University Professor Dale W. Jorgenson, who taught Bernanke as an undergraduate, stressed that many economists at the Federal Reserve have to sign on to such a decision before it is enacted, but he said “there is definitely going to be a move in that direction.”

“[Bernanke has] been taking steps already to prepare the way,” Jorgenson said. “He’s given a lot of speeches.”

Jorgenson said he expected Bernanke to be more open about discussing the economy than Greenspan has been during his 18-year tenure.

“Greenspan is much less transparent than Bernanke,” said Jorgenson. “When [Bernanke] gets in front of a microphone, he is very clear about the outlook for the economy.”

Jorgenson advised Bernanke’s undergraduate thesis, “An Integrated Model for Energy Policy,” which won the Allyn A. Young Prize for the best Harvard undergraduate economics thesis in 1975.

Solow said he expects a speedy appointment process.

“Everybody seems to like the idea, and I’m one of them,” he said. “I think of all the names mentioned, he is the best.”

Bernanke, 51, had long been considered a leading candidate for the chairmanship, along with Baker Professor of Economics Martin S. Feldstein ’61 and Columbia Graduate School of Business Dean R. Glenn Hubbard.

Feldstein served as President Ronald W. Reagan’s chief economist and taught Social Analysis 10, “Principles of Economics,” for 21 years. Hubbard was a former top Bush adviser who helped engineer the president’s tax cuts.

If the Senate confirms him, Bernanke will be the nation’s 14th Federal Reserve chairman.

Bernanke lives in Washington, D.C. with his wife and two children.

–Staff writer Evan H. Jacobs can be reached at ehjacobs@fas.harvard.edu.

–Staff writer Daniel J. T. Schuker can be reached at dschuker@fas.harvard.edu.