Bernanke: Federal Reserve shouldn't use interest-rate policy to fine-tune financial stability risks

[honest.abe]

The Federal Reserve shouldn’t use its interest-rate policy to “fine-tune” financial stability risks, said former Fed Chairman Ben Bernanke on Monday.

Speaking to reporters at the Brookings Institution after he was awarded the Nobel Prize in Economic Sciences, Bernanke said the “first line of defense” is to have strong regulation in place.

“I don’t think we understand that well enough, except in perhaps extreme conditions, to try to fine-tune financial stability using monetary policy,” Bernanke said.

Many Wall Street analysts have argued that the Fed should moderate the rapid pace of its rate increases to avoid something breaking in financial markets.

https://finance.yahoo.com/m/49732cf8-8231-3a93-89ca-c2d86b1e3626/bernanke-says-fed-shouldn%E2%80%99t.html

https://www.marketwatch.com/story/bernanke-says-fed-shouldnt-use-interest-rates-to-fine-tune-financial-stability-risks-11665431037

I trust Bernanke more than Powell on this matter.

Stocks and 401ks are tanking, mortgage rates jumping, real estate markets in turmoil, and inflation still not under control. Clearly what Powell is doing is not working. I think he needs to be replaced by someone like Bernanke.

[bucolic_frolic]

1. Far too early for the Fed medicine to work or be evaluated

Time lags. Volcker took about 3-4 years. Inflation raged from 1975-1982.

And what was Bernanke doing during the Great Recession? Fine-tuning financial stability using monetary policy? I'd say so.

Ben is suddenly the expert with his new Nobel. Helicopter man drowing in helicopter money.

[honest.abe]

2. The Great Recession was an "extreme condition" as he noted.

Do you really trust Powell over Bernanke??

[bucolic_frolic]

3. They are equally repulsive

Bernanke was far too liberal with QE1-2-3. He knew inflation would result. The Fed never allowed a cyclical recession, one that retires old technology and companies, and allows room for new innovation and growth. They thought they could have prosperity forever.

Power is late to the inflation fight. He acted 9-12 months too late. Had he acted 15 months ago, inflation would be 1/2 to 2/3 of what it is today.

Our financial system - the banks, the FED - is run by bankers who vote for greed and lending to make money for themselves and their class. An economy should be run by - guess who? Economists. Yeah, Bernanke is an economist, and he did the best he could, but look at the legacy he allowed to sprout on his watch.

At this point I do trust Powell to fight inflation, though I think he got the green light from Joe Biden. They met shortly before the rate hikes started. Joe knows what destroys the dollar, and politicians - inflation!

[honest.abe]

4. Powell is a Republican and Bernanke is a Democrat (correction Independent)

That makes Powell ten times more repulsive.

[JohnSJ]

5. You realize Ben Bernanke was a republican appointed by bush, now is an independent

[honest.abe]

6. Ben Bernanke has publicly broken ranks with the Republican party.

Ben Bernanke has publicly broken ranks with the Republican party.

In one of the more revealing passages of his just-published book The Courage to Act, the former chairman of the US Federal Reserve lays out his experience with Republican lawmakers during the twin financial and economic crises that dominated his term as the head of the world’s most important central bank. Continual run-ins with hard-right Republicans—such as noted Fed critic Ron Paul, the former Texas congressman—gradually pushed him away from the party that first put him in charge of the Fed in 2006. (He was nominated for the job by president George W. Bush, for whom Bernanke served as head of the White House Council of Economic Advisors.)

“[T]he increasing hostility of the Republicans to the Fed and to me personally troubled me, particularly since I had been appointed by a Republican president who had supported our actions during the crisis. I tried to listen carefully and accept thoughtful criticisms. But it seemed to me that the crisis had helped to radicalize large parts of the Republican Party,” Bernanke writes on page 432.

https://qz.com/518111/bernanke-im-not-really-a-republican-anymore/

So actually I think he claims he is now an Independent not a Democrat. So that part I was wrong. But for sure he is not a Republican.

[JohnSJ]

7. That is what I said. He is not a Democrat either. The fact is Federal reserve chairman have

not used politics to manage monetary policy.

Volker was a Democrat, who brought the economy to its knees because of inflation. Not much different than what Powell is doing.

If trump was elected in 2020, there is no doubt he would have fired Powell, and without a doubt appointed a political operative. In 2018 trump want to fire Powell, but was dissuaded by his advisors who believed only Congress had that authority

[honest.abe]

8. I simply trust Independent Bernanke more than Republican Powell.

No sure why you dont.

[JohnSJ]

9. Because they both are non-partisan in regard to monetary policy. It is not a question of trust

You also initially posted he is a Democrat, and that is not how he identifies himself

[honest.abe]

10. So the question is one of them is wrong.

I think it’s Powell.

[JohnSJ]

12. That is your view, not the view of others currently on the federal reserve

https://www.independent.org/publications/article.asp?id=14021

[honest.abe]

15. It's the same view as Ben Bernanke.

I will stick with his opinion.

[JohnSJ]

17. He isn't talking about what Powell is doing with inflation

[honest.abe]

18. Why do you say that? Seems obvious he is.

The Federal Reserve shouldn't use its interest-rate policy to "fine-tune" financial stability risks, said former Fed Chairman Ben Bernanke on Monday.

[tritsofme]

11. Unless I am reading something wrong, Bernanke doesn't appear to be criticizing Powell.

And his strategy of hiking rates to combat inflation?

[JohnSJ]

13. He isn't. He is not referring to addressing the inflation, where interest rates are the only tool

available to address that by the fed.

The rising interest rates should lower home prices and car prices

What it won’t address is the high cost of gas and shortages which have an effect on food and other things

[tritsofme]

16. Right, it seems like he is giving prospective advice, not criticizing Powell, as OP suggests.

[Roland99]

22. Except supply chain issues are artificially raising prices of many goods

Higher car loan interest rates aren’t gonna drop the prices of cars

[stopdiggin]

14. there is no element of 'fine tuning' in what the Fed is doing currently

And thus - really can't conceive how Bernanke's remarks would be construed as taking aim at those policies. Frankly, I don't think people (or the post) understood what he was saying.

[honest.abe]

19. So tell us what is he saying??

[stopdiggin]

20. To me - it appears as he is addressing an entirely different

set of circumstances. And clearly NOT the 'hair on fire' run of inflation - that, even now, many feel the Fed was 'late to the party' in addressing as of this summer. The clue would be in the term 'fine tuning' - which I don't think anyone would apply to what the Fed is doing now. 'Dead serious' is the description I think most are reaching for.

(and, yes - there are critics for this as well. but no one is describing it as 'fine tuning' or half baked)
----- ------

(and, really - for people that want to put this in terms of political 'camps' - for the life of me, I cannot fathom the stance that would make run-away inflation - anything less than a killer for the working class. really? how does that work?)

[honest.abe]

21. "Fine tuning" is exactly what Powell is attempting to do.

He has said a number of times he is trying to slow the economy and have a “soft landing”. To me that is the “fine tuning” Bernanke was referring to.

Perhaps my comments about this being political are a bit exaggerated but nowadays I don’t trust anyone tied to Trump or the Republican Party.

[stopdiggin]

23. I can only disagree

To my mind the Fed's current actions are, if not draconian, then certainly of the 'hard nosed' variety. (and as I related they are certainly coming under criticism and characterizations as such) Thus, not fine tuning. And 2) consequently, I do not think that this was what Bernanke was referring to.

And .. I am not going to assign a political agenda to the Fed - unless I can see some inkling of such. And, in this case - I see none. This is some 'tough medicine' - but, in my opinion, clearly preferable to what lies down the road without it. And that is a prescription for the entire populous and economy (Even while acknowledging that the weight is not always borne equally. But then - when has it ever been?)

[honest.abe]

24. Well I do agree what Powell is doing is "hard nosed" but..

the result I think is supposed to be "fine tuning" the economy. Which it probably wont and will likely result in an ugly recession if he keeps it up. Anyway, I am done with this thread. Appreciate your comments. Have a good day!