Bernanke shrugs off plenty of dissent
Paul Wiseman | Hagadone News Network | UPDATED 13 years, 1 month AGO
WASHINGTON - For someone known as a consensus builder, Federal Reserve Chairman Ben Bernanke sure generates - and shrugs off - a lot of dissent.
Bernanke last month pushed ahead with a plan to keep short-term interest rates near zero through mid-2013 despite three dissenting votes on the Fed's policy-making committee. For decades, the Fed's culture, and sometimes its strong-willed chiefs, have normally capped dissents at two.
Former Fed Vice Chairman Alan Blinder, a Princeton economist, suggests that Bernanke's willingness to accept three dissents last month has "broken the ice": Bernanke won't let resistance from several members stop him from pushing through bold moves that he and a Fed majority consider necessary.
It's one reason many economists expect the central bank to announce something new after its policy meeting this week to try to jolt the sputtering economy.
Eventually, some economists expect the Fed to try for the third time to stimulate growth through a program to buy Treasurys to lower long-term interest rates. That's a step known as "quantitative easing."
Whatever step he proposes, Bernanke would surely prefer unanimous support, to avoid sending any mixed messages to financial markets. But the chairman, an even-tempered academic, doesn't shrink from debate.
"My attitude has always been if two people always agree, one of them is redundant," Bernanke said after a speech this month in Minneapolis. "I have always tried to encourage . debate and discussion."
He hasn't been disappointed. Bernanke hears plenty from dissenting committee members who worry that his efforts to energize growth and job creation with super-low interest rates are hurting savers and could ignite inflation.
Fed officials say the central bank remains collegial despite the dissension. They contrast Bernanke's Fed with the leadership of former chairmen like Arthur Burns and Paul Volcker, who were known for imposing their will on colleagues.
"Sometimes we have different opinions, but it's all very congenial and very professional," one of the dissenters, Charles Plosser, president of the Federal Reserve Bank of Philadelphia, told The Wall Street Journal this month. "It's not a vote of no-confidence in Bernanke ... This is about how difficult decision-making is right now."
Outsiders have been less polite. Bernanke's policies have come under fire from members of Congress and from Republican presidential candidates like Texas Gov. Rick Perry and Texas Rep. Ron Paul.
Bernanke still commands most of the votes on the policymaking Federal Open Market Committee.
"He's the kind of guy who convinces people to go along with him," says Rutgers University economist Michael Bordo. "He doesn't bully them or browbeat them."
Undivided or near-unanimous Fed decisions are designed to send a clear message to markets about the central bank's intentions. In deference to tradition, committee members have sometimes cast votes with the majority despite their misgivings.
But the self-censorship carries costs, too, economists say. It deprives investors of useful information about the range of debate within the central bank and of hints about the direction of interest rates, according to a paper last year by Petra Gerlach-Kristen of the Bank for International Settlements and Ellen Meade of American University.