Daily Austerity Watch: Will Bernanke’s First Press Conference Bomb?

Daily Austerity Report feels sorry for Federal Reserve Chairman Ben Bernanke as he prepares for his first press conference this afternoon.   No matter what he does, he will disappoint somebody.

Bernanke, a bright, pleasant fellow is not a particularly polished or charismatic speaker.  He gamely withstood an otherwise unmemorable feature about him on “60 Minutes.” Bernanke has taken pre-screened questions from the media twice before at the National Press Club.  Sobriety and thoughtfulness are fine qualities in a central banker or an economics professor, which he was before his appointment at the Fed, but they don’t work in a press conference.   The economist is entering uncharted territory that he can prepare for by consulting a computer model.

The press conference, a once a quarter affair that was Bernanke’s idea, comes at a critical time for the Fed.  For years, the Fed has tried to insulate itself from politics.  Bernanke’s most vocal critic,  Rep. Ron Paul (R-TX), is expected to announce today that he is running for president.   The Libertarian from Texas made the evils of the Fed a central plank of his 2008  campaign and it’s a theme that Paul will visit again.  He also oversees the House Domestic Monetary Policy Subcommittee, which — of course — overseas the Fed.

“The biggest counterfeiters in the world are the Federal Reserve,” Paul said in an interview with The Colbert Report. “Most Americans now think the Federal Reserve doesn’t do a very good job.”

That’s probably among the kinder things that Paul has said about the Central Bank.   Though economists may quibble, many Americans agree with Paul’s views.   The Texan finished first in a straw poll in Bernanke’s homestate of South Carolina.

Bernanke’s other challenge is making the dismal science less dismal.   The purpose of the gathering is to discuss the outcome of the Federal Open Markets Committee.   A free-flow of ideas is not in the cards.  As the Wall Street Journal noted, Bernanke will focus on the FOMC’s decision “rather than his own thoughts.”

That’s not going to fly.

But then again,  change is not easy for anyone, let alone the central bank.  The Fed didn’t even announce that it changed its benchmark interest rate until 1994, forcing the market to figure that out.  In 2008, Bloomberg News sued the Fed seeking details the securities being as collateral for $1.5 trillion of loans to banks.   Bernanke lost that case this year.

“For most of its 98-year history, the Federal Reserve has operated with all the transparency and enthusiasm for change of the Vatican. Now the ultra-secretive Fed is starting to change its ways, if somewhat grudgingly,” Bloomberg News wrote in March.

To hold a successful press conference, Bernanke will have to  reach both sophisticated investors and those who think that QE2 is just a ship.   He will have to show compassion to the millions who are out of work or whose personal finances lie in ruins.   Yet, the economist must recognize the growing unease Americans have about the country’s debt crisis and the fact that most people have no idea what to do about it.  Moreover,  Bernanke will be asked to opine on the impact of rising gas prices on the economy.

In short, Bernanke has an impossible task that even President Obama has failed to master.  Good thing the Fed Chair isn’t up for reelection.

–Jonathan Berr