When he was 11, Ben Bernanke, the spelling champ from South Carolina, was within a whisker of appearing on the Ed Sullivan Show. Back in 1965, this was a big deal; the Beatles had made their first barnstorming appearance in America on the show the previous year. But Bernanke couldn’t remember how many ”i”s there were in edelweiss and missed the televised national final by one mark.
For Bernanke, it proved a minor setback on the long road from boy prodigy to chairman of the Federal Reserve, the world’s most powerful central bank. The progression through academia to economic policy supremo has been seamless and trouble-free. Until now.
Under Alan Greenspan, the chairperson of the Federal Reserve was the second most powerful man in the world. Some would say that when Bill Clinton was president, he went one better. But after an accident-prone start and with markets tumbling, whispers have started on Wall Street: is Bernanke up to it?
Some in the financial markets are sympathetic. Gerard Lyons, chief economist at Standard Chartered Bank, says: ”He’s a very nice guy. He’s thoughtful and pragmatic; the difficulty he has is that he is on a hiding to nothing.”
Bernanke can also call on the experience of friends in high places. Mervyn King, the governor of the Bank of England, was a colleague when they were both professors at Massachusetts Institute of Technology (MIT) in the 1980s and has some advice for his old friend: ”Think deeply and don’t get carried away with the latest statistic.”
Like King, Bernanke comes from the new breed of academics turned central bank governor. Indeed, his CV is a rollcall of blue riband US campuses — Harvard, Stanford, Princeton, MIT. King, though, had been battle-hardened as the Bank’s chief economist during the Black Wednesday fiasco of 1992; Bernanke had run a school board in New Jersey and the Princeton economics department before he moved in to the hot seat.
At Princeton, Bernanke joked that he had to make the tough decision of whether to serve ”bagels or doughnuts at the department coffee hour”. His dilemma now is rather more serious. Should he keep putting up interest rates to tame inflation, or heed the warnings of those who say the US is already teetering on the brink of recession and that dearer money will push it over the edge?
Bernanke, the son of a pharmacist, was raised in the hamlet of Dillon. Explaining the bookishness which saw him achieve the top SAT score in the state at high school — 1 590 out of 1 600, he said: ”We lived in a small town that didn’t have a movie theatre.”
Harvard beckoned, where he graduated with the highest honours. A PhD followed at MIT, where he was diverted from research into the Great Depression by another story of ill-fortune: the ability of his team, the Boston Red Sox, to snatch defeat from the jaws of victory.
The Red Sox finally broke an 86-year curse when they won the World Series in 2004, just as Bernanke was being lined up to replace Greenspan.
Observers say that as a non-ideological Republican he will also find it easy to switch sides should there be a Democrat in the White House. Even so, his reputation as an economist meant he was the White House’s first choice for Fed chairperson when Greenspan stepped down, and he had been able to play himself into the policy role — first as a governor of the Fed and then as chairperson of Bush’s Council of Economic Advisers.
Bernanke recently said the hardest part of moving to the Fed was having to wear a suit: ”My proposal that Fed governors should signal their commitment to public service by wearing Hawaiian shirts and Bermuda shorts has so far gone unheeded.” That, though, was before the events of the past few weeks.
Greenspan’s musings on the economy were notoriously opaque. Bernanke has said he wants the Fed’s decisions to be more transparent.
Unfortunately, Wall Street has been left confused by his openness. He has sent out mixed messages, sometimes appearing to be relaxed about inflation then correcting himself. Lyons says Bernanke is in an unenviable position: Greenspan created a monster housing bubble and left before it went pop.
Mark Weisbrot, of the Centre for Economic and Policy Research in Washington, agrees. ”My main take on him is that he is getting a bad rap because Greenspan left him with a mess. Bernanke is getting the blame for what Greenspan did.”
But that won’t matter should the economy tank. Rightly or wrongly, he will be blamed. The best speller the Fed has had knows now there’s only one ”i” in edelweiss. And none in scapegoat.
The CV
Born: Ben Shalom Bernanke, 1953, in Augusta, Georgia. Grew up in Dillon, South Carolina. Father owned a drugstore.
Family: He and wife Anna have two children, Alyssa and Joel
Education: Excelled at school and became South Carolina spelling bee champion at 11. BA in economics from Harvard University (1975); PhD in economics from Massachusetts Institute of Technology (1979)
Career: Taught economics at Stanford University (1979-1985) and Princeton University (1985-2002); editor of American Economic Review (2001-2004). Appointed by President George Bush as governor of Federal Reserve Bank (2002). Chairperson of president’s Council of Economic Advisers (2005-) – Guardian Unlimited Â