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The Ascent Of Gentle Ben


Every other Monday morning, the governors of the Federal Reserve gather around a massive mahogany table to discuss the nation's economic health and the state of the banking system. During the three years that Ben S. Bernanke attended those sessions, a routine developed. The former Princeton University economics professor would start quizzing Fed staffers on the deeper meaning of the data. More often than not, before an aide could get a word in, Fed Chairman Alan Greenspan would offer his own elegant explanation. Bernanke would listen attentively, then quietly say: "Be that as it may...I'd still like the staff to get back to me."

The scene played out so often that some Fed officials came to joke about Bernanke's "be that as it may." As a neophyte central banker from 2002 to 2005, Bernanke never challenged Greenspan's authority. Yet he never backed down in his quest for more data and differing views. Eventually, he would get both the information he wanted and the chairman's respect.

COLLEGIALITY

Now, he's about to get Greenspan's job. On Oct. 24, President George W. Bush named Bernanke to chair the Fed when the 79-year-old Greenspan retires on Jan. 31. Fed colleagues say that Bernanke owes his swift rise from chairman of Princeton's economics department to the threshold of the world's preeminent economic-policy job to his knack for getting along with intellectual heavyweights through a combination of professional rigor and collegiality.

But other skills, untested during his 23 years in academia and three years in Washington, could prove even more vital. Wall Street's Fed watchers wonder whether an academic like Bernanke will be flexible in responding to the economy or wedded to his own theories and mathematical models about the way the world works. They also fret that Bernanke has never been tested in a crisis -- an arena where Greenspan triumphed throughout 18 years at the Fed. The low-key Bernanke did not come off particularly well when, as chairman of Bush's Council of Economic Advisers (CEA), he tried to soothe the markets' frazzled nerves in the wake of Hurricane Katrina. "He lacks a commanding presence in front of the camera," says David Gilmore, partner at consultants Foreign Exchange Analytics in Essex, Conn. Even in private briefings at the White House, one Administration insider concedes, the President's chief econo-wonk did not always display the crisp certitude that political types favor.

Bernanke's greatest strength will be his intellect. Considered one of the finest monetary economists of his generation, the 51-year-old Bernanke can hold his own on the minutiae of credit flows and inflation expectations. But unlike most economists, Bernanke can tie those arcane concepts to the real world, without seeming to talk down to people. "In the academic world, you can develop lots of sound ideas, but you have to convert those into good policies," says former Commerce Secretary Donald L. Evans, now CEO of the Financial Services Forum. "He has been able to bridge the two." That skill, coupled with a wry, self-deprecating wit, won over President Bush during Bernanke's five-month stint as CEA chairman.

Bernanke's smarts were on display as far back as sixth grade, when the 11-year-old won the South Carolina state spelling bee. Like Greenspan, he came to love statistics by studying baseball box scores: A longtime Boston Red Sox fan, he cut classes in 1975 to listen to the World Series. The son of a druggist and a schoolteacher, he taught himself calculus, then went on to score 1590 of a possible 1600 on his SAT college boards to win admission to Harvard University. After graduating summa cum laude with a degree in economics, he earned a doctorate from Massachusetts Institute of Technology in 1979 and opted for the academic life, teaching at Stanford University before settling at Princeton in 1985.

Bernanke made his academic mark with research on the Fed's role in causing and prolonging the Depression. He eschewed the esoteric to focus on topics that could have relevance for policymaking. "It's the guiding principle in his work," says New York University professor Mark Gertler, who wrote several papers with Bernanke. "Anything we did had to be connected to the real world."

Yet Bernanke's own politics didn't come through in his research. Princeton colleague Alan S. Blinder, appointed by Bill Clinton as Fed vice-chairman for 1994-96, was unaware for years of his friend Bernanke's GOP leanings.

CALM CONSENSUS

What sets Bernanke apart from many other academic economists is his ability to forge consensus. Those skills emerged when he joined the Montgomery Township (N.J.) school board in the mid-1990s, and calmed its contentious relations with teachers through two contract negotiations. He spent seven years chairing Princeton's powerhouse econ department, muting his own politics to manage a largely liberal group. Describing that job in a speech earlier this year, Bernanke joked that he had "responsibility for major policy decisions such as whether to serve bagels or doughnuts at the department coffee hour."

That ability to puncture his own importance helped Bernanke win admirers at the Fed, including Greenspan himself. Before Bernanke arrived, the chairman worried that he was in for a repeat of his prickly experience with Blinder. Those concerns proved misplaced. Bernanke did persistently push his view that the Fed should establish a numeric target for inflation -- a stance that Greenspan opposes in favor of a more flexible approach. But he did so gently, seeking to build support among fellow governors and avoiding confrontation with Greenspan. "They always had a good back-and-forth on that and other issues," a Fed official says.

Moving to Washington entailed sacrifices. In the capital, Bernanke griped, he was expected to wear a suit every day. "My proposal that Fed governors should signal their commitment to public service by wearing Hawaiian shirts and Bermuda shorts has so far gone unheeded," he told a group of economists last January. His wife, Anna, formerly a Spanish teacher at Princeton Day School, has relocated to the National Cathedral School. She missed Bernanke's confirmation hearings for the CEA because she was giving her seventh graders an exam. Their two children, Alyssa and Joel, are in college.

But little changed in Bernanke's style when he moved from academia to the world of policy. Unlike other governors, he lunched in the staff cafeteria, joining aides for impromptu skull sessions. The ex-academic also wowed staffers by drafting his own speeches and digging into spreadsheets for data.

Bernanke also went out of his way to cultivate fellow governors. He formed close ties with two Greenspan confidants, staffer-turned-Governor Donald L. Kohn and Fed Vice-Chairman Roger W. Ferguson Jr. Even after long discussions, neither Kohn nor Ferguson was won over to Bernanke's idea of setting inflation targets.

As he prepares for a scheduled Feb. 1 ascension to the top job at the Fed, Bernanke's confirmation is considered pro forma on Capitol Hill. But the brainy economist will then have to take his case for targeting inflation to a much broader, and arguably tougher, audience: Wall Street, Main Street, and the world's other central bankers will all want to see if Gentle Ben has the vision and the street smarts to succeed a monetary master the likes of Alan Greenspan.

By Rich Miller, with Richard S. Dunham, in Washington


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