All The Things Bernanke Did Not Say

Journalists who cover Congress usually believe that they are smarter than the public servants.  Politicians think most journalists are biased dolts. Each group has now had a chance to publicly interview Ben Bernanke and neither has made any progress  in finding out the plans of the Federal Reserve.

The Federal Reserve disclosed that it has dropped its GDP growth projection for the year to a range of 3.1% to 3.3% from 3.4% to 3.9%. That was the most important information of the day, and a press conference was not necessary to distribute it.

Bernanke said, at his press conference, that the Fed could not do much about oil prices, that it had labored mightily but mostly unsuccessfully to fight unemployment, and that the rate of inflation had begun to accelerate.

Reporters did not ask the really important questions about the Fed’s policy plans, because they knew Bernanke would not answer them.

The Fed’s board and upper level staff are dominated by economists and academics. They are, as a group, certainly careful and meticulous planners. It is impossible to believe that they have not had extensive discussions about really serious inflation, extended high unemployment rates, and a further collapse of the housing market. Fed insiders also have spent countless hours in debate about the value of the dollar and trade policy. There may be a consensus on most of these issues, or a raging debate that has pit one group against another. The people who run the Fed, in short, have looked at all the likely problems the economy and financial systems face and know how the central bank is likely to act. Or, these same people know that a consensus on some issues has been impossible to forge and will be a matter of violent argument if the time comes when an argument is worthwhile.

It would have been worthwhile for a journalist to ask Bernanke for the detailed minutes of the governor meetings and conversations as well as detailed summaries of the plans that Fed staff have put together if oil moves above $150 a barrel for a quarter or if inflation suddenly and alarmingly balloons. Bernanke would have said that the Fed does not disclosure that sort of detail, and, if it did, it could upset the financial markets should any of the central bank’s forecasts range to dire.

Congress usually does not get Bernanke to say much beyond what he reads in the initial statements as he testifies. The press made no additional progress today. The Fed is no black box but it has many of the characteristics of one.

Douglas A. McIntyre