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Ben, you may be leaving? But we just met

Fred Williams

One question was unlike all the others thrown at the Federal Reserve chairman during his four-times-a-year news conference this week.

“When is the last time you spoke with someone who is unemployed?” the reporter from The New York Times asked.

Benjamin S. Bernanke raised his eyebrows and paused before answering. “Pretty recently,” he said, mentioning that an unnamed relative of his is out of a job. Then he warmed to the question.Nation's interest rate chief may be leaving

“I come from a small town in South Carolina that has taken a big hit from the recession,” he said. “The last time I was there the unemployment rate was about 15 percent — I think it’s better now. The home I’d been raised in had just been foreclosed on when I was visiting there.”

Bernanke may be heading for a job change of his own. Nothing is known for certain, but some Fed watchers expect him to leave when his term expires in January 2014, bringing the nation, and the global economy, a new arbiter of interest rates.

It seems as though we’re only now getting to know Bernanke. It’s not that his personal link to the foreclosure crisis was a revelation, having been reported previously. And tales of the future Fed chairman waiting tables at the highway stop-off South of the Border have made the rounds before as well. But it was a rare moment to see the economist-in-chief show his regular-guy side when he stepped out of his role to talk about his personal life.

In comparison to predecessor Alan Greenspan’s 19-year tenure as chairman, we’ve only just met Bernanke, who was first appointed by President George W. Bush in 2006 and re-upped in 2010.

Bernanke’s tenure has covered the descent into the financial crisis in 2008, the Great Recession that followed, and the unprecedented measures to bring the economy back to health that continue to keep interest rates at historically low levels. During his watch, the Fed’s balance sheet has grown to more than $3 trillion, as the central bank created money in its attempt to create jobs.

“Just as winding up all this very aggressive easing is uncharted territory, the winding down is also uncharted territory,” said Robert Dye, chief economist at Comerica Bank.

Easing off the monetary accelerator will mean tapering off purchases of Treasury securities and, probably starting in mid-2015, gradually ratcheting interest rates back up. Exiting from the current easy-money policies could be difficult and unpopular. With the U.S. Treasury owing nearly $12 trillion to the public (not counting entitlement obligations), rising interest rates represent a major expense for the federal budget. Higher rates are expected to swell the deficit in coming years, the Congressional Budget Office projects.

Furthermore, the job of guarding against another meltdown of the financial system is not finished. The problem of too-big-to-fail banks remains, Bernanke said Wednesday. Bank stress tests and proposals for higher capital requirements have not made the economy safe from another collapse that would require the government, and taxpayers, to step in.

During the press conference, Bernanke used the inscrutability he has developed when talking about monetary policy to cloak the question of his own future at the Fed. The one new tidbit he disclosed was that he has talked “a bit” with President Barack Obama about his future; but he said nothing about the substance of those talks.

To Martin Schwerdtfeger, senior economist at TD Economics, the calm tone of the remark seemed to indicate that Bernanke is looking forward to continuing in his role. But that impression was canceled out at the end of the press conference, when Bernanke stressed that he is not indispensable.

Asked whether he feels personally responsible for seeing the work through, Bernanke replied with a little laugh, “I don’t think I am the only person in the world who can manage the exit.”

“This is an extraordinary institution,” he continued, speaking of the Fed and its many Ph.D. economists. When it comes to making monetary policy, “there’s no single person who’s essential to that.”

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