What to Expect from Bernanke at the Fed

President Bush nominated Ben Bernanke Monday to follow Alan Greenspan as chairman of the Federal Reserve. Renee Montagne talks to David Wessel, deputy Washington bureau chief of The Wall Street Journal, about the change in policy that could be anticipated from Bernanke.

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RENEE MONTAGNE, host:

Time now for business news. We begin with the man nominated to fill Alan Greenspan's shoes.

Financial markets reacted positively yesterday to President Bush's nomination of Ben Bernanke as chairman of the Federal Reserve Board. If confirmed by the Senate, he will replace Alan Greenspan, who has served as Fed chairman for 18 years. For more on this choice, we turn now to David Wessel, deputy Washington bureau chief of The Wall Street Journal.

Good morning.

Mr. DAVID WESSEL (Deputy Washington Bureau Chief, The Wall Street Journal): Good morning.

MONTAGNE: Would you expect Fed policy to be different under Ben Bernanke than it has been under Alan Greenspan?

Mr. WESSEL: Well, in its basic outline, I think Fed policy will be very similar. Bernanke believes that inflation is the prime--fighting inflation is the prime objective of the Fed. Like Mr. Greenspan, he doesn't think the Fed should be moving interest rates to burst stock market or real estate bubbles. But he does believe in something called inflation targeting, which means setting a specific target for inflation that the Fed publicizes in advance and then tries to hit.

MONTAGNE: Now Alan Greenspan has long opposed inflation targeting. What's his argument?

Mr. WESSEL: Mr. Greenspan has preferred ultimate flexibility where he could set interest rates where he thought appropriate no matter what the circumstances. But he enjoyed what you might call the `Greenspan standard.' He could get away with that. Advocates of inflation targeting say setting a rule like this, which actually is pretty similar to the way the Fed has actually operated, might make it easier for Mr. Bernanke to continue Mr. Greenspan's success as a monetary policy-maker.

MONTAGNE: Now another thing under Alan Greenspan: The Fed has been criticized for the secrecy of the way it makes decisions. Is there any indication that Bernanke will try to make the Fed a more transparent operation?

Mr. WESSEL: Well, there certainly is. For one thing, he talks all the time about how important it is to be transparent and to be clear about what the Fed is doing and what their objectives are. And beyond that, unlike Mr. Greenspan, who was born without some enzyme that allows you to speak in simple declarative sentences, Mr. Bernanke is actually a very clear speaker. He's a practiced teacher, and he's very cogent, and I think it'll be a lot easier for people to understand him until he figures out that maybe that's not such a good idea and starts sounding like Greenspan.

MONTAGNE: Well, coming from a White House job--and that job, perhaps we should remind listeners--is the head of the head of the President's Council of Economic Advisers--is that an asset or a liability?

Mr. WESSEL: It does give Mr. Bernanke a feel for Washington politics, which is really important for a Fed chairman. The problem he'll have, I think, is when he starts to talk about deficits, taxes, Social Security, people will be questioning his motives. Is he continuing to speak on behalf of the Bush administration? Or if he differs from the Bush administration, does this mean that he was not telling the truth while he was at the White House? I suspect, at least in the beginning, that that means he won't talk very much about anything, except those subjects in the Fed's purview: inflation, banking and monetary policy.

MONTAGNE: And just quickly, any views as to why President Bush chose him and made the announcement this week?

Mr. WESSEL: Well, he's obviously a very qualified guy. They're talking about him as the John Roberts of central banking. It was very convenient for Mr. Bush to have some good news to talk about now with all this talk of indictments of his aides and hurricanes and stuff like that.

MONTAGNE: David, thanks very much.

Mr. WESSEL: A pleasure.

MONTAGNE: David Wessel is deputy Washington bureau chief of The Wall Street Journal.

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