What the Fed's Recent News Conference Really Means
Ben Bernanke held a news conference yesterday (Wednesday). It was historic. It was the first regularly scheduled news conference ever held by the Fed. The fact that the Fed Chairman has never held a regularly scheduled news conference but now he has is significant. Here's what I think it means.
First, the Fed must be nervous about recent attacks. Led by Ron Paul, who - pretty much on his own - has always criticized the Fed, the Congress has demanded more transparency from the normally secretive Fed. In spite of initial resistance, the Fed caved and began to release information it had always kept from the public eye.
During the conference, Bernanke was asked why he decided to hold the news conference - or as the questioner asked, this "historic" news conference. He recognized the Fed has traditionally been secretive. But now they've decided they should be held accountable and transparent. Bernanke claims that he felt this way all along, but the Fed simply didn't function that way. He mentioned that, in the past, it was thought that a wayward comment by a Fed Chairman might create volatility in the markets. He didn't explain why that would no longer be a problem.
So Bernanke positioned the news conference as something that he might have done all along, except for the fact that the Fed was traditionally secretive. I guess it's mere coincidence that this news conference follows demands for transparency - demands initiated by Ron Paul that were vigorously resisted for years, and resisted by Bernanke from the moment he became Chairman.
But the second reason I think the news conference was held is that the Bernanke and the Fed must be super-nervous about what's going on in the economy and the monetary system. By posing for the cameras, I think it does take a bit of pressure off Bernanke and the Fed. In a way, they're saying, "Hey, here we are. Ask us any questions you want. We'll tell you what we know." If things keep going wrong, they can't be accused of making secret decisions that screwed things up. They can just say, "We told you what were thinking; if you didn't like it, you had every chance of saying something."
The media naturally asked mostly typical, non-threatening questions. It was a real love-fest, for the most part. The media was in effect playing their usual uninformative harmless role. Bernanke remained pretty much in charge. (One commentator on Bloomberg TV, a guy named Peter Cook, said something after the news conference to the effect that Bernanke was "masterful" - or some such term - noting that Benny displayed a real comprehensive knowledge of the facts, a real command of everything going on, etc. I thought his comment were pathetic and delusional. Cook must either be on the Fed payroll, or on Prozac or some such mood-altering substance.)
In any case, I think they're nervous and want to drag more people into the decision-making circle, so that they're not strung up if things don't improve.
Apparently the Fed will hold news conferences in the future following its sessions where it decides on interest rates. So there will be more to come. Maybe it will be more interesting than this one was. The commentary I heard by the financial media after the conference (I usually don't listen much to this stuff, but, hey, it was historic, right?) was pretty boring and lacking in any special or meaningful insight. But why should their commentary be any more interesting or meaningful just because they were commenting on this "historic" news conference?
First, the Fed must be nervous about recent attacks. Led by Ron Paul, who - pretty much on his own - has always criticized the Fed, the Congress has demanded more transparency from the normally secretive Fed. In spite of initial resistance, the Fed caved and began to release information it had always kept from the public eye.
During the conference, Bernanke was asked why he decided to hold the news conference - or as the questioner asked, this "historic" news conference. He recognized the Fed has traditionally been secretive. But now they've decided they should be held accountable and transparent. Bernanke claims that he felt this way all along, but the Fed simply didn't function that way. He mentioned that, in the past, it was thought that a wayward comment by a Fed Chairman might create volatility in the markets. He didn't explain why that would no longer be a problem.
So Bernanke positioned the news conference as something that he might have done all along, except for the fact that the Fed was traditionally secretive. I guess it's mere coincidence that this news conference follows demands for transparency - demands initiated by Ron Paul that were vigorously resisted for years, and resisted by Bernanke from the moment he became Chairman.
But the second reason I think the news conference was held is that the Bernanke and the Fed must be super-nervous about what's going on in the economy and the monetary system. By posing for the cameras, I think it does take a bit of pressure off Bernanke and the Fed. In a way, they're saying, "Hey, here we are. Ask us any questions you want. We'll tell you what we know." If things keep going wrong, they can't be accused of making secret decisions that screwed things up. They can just say, "We told you what were thinking; if you didn't like it, you had every chance of saying something."
The media naturally asked mostly typical, non-threatening questions. It was a real love-fest, for the most part. The media was in effect playing their usual uninformative harmless role. Bernanke remained pretty much in charge. (One commentator on Bloomberg TV, a guy named Peter Cook, said something after the news conference to the effect that Bernanke was "masterful" - or some such term - noting that Benny displayed a real comprehensive knowledge of the facts, a real command of everything going on, etc. I thought his comment were pathetic and delusional. Cook must either be on the Fed payroll, or on Prozac or some such mood-altering substance.)
In any case, I think they're nervous and want to drag more people into the decision-making circle, so that they're not strung up if things don't improve.
Apparently the Fed will hold news conferences in the future following its sessions where it decides on interest rates. So there will be more to come. Maybe it will be more interesting than this one was. The commentary I heard by the financial media after the conference (I usually don't listen much to this stuff, but, hey, it was historic, right?) was pretty boring and lacking in any special or meaningful insight. But why should their commentary be any more interesting or meaningful just because they were commenting on this "historic" news conference?
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