Is this thing on? Bernanke steps to the mike

Martin Wolk Chief economics correspondent • Profile • E-mail

Poor Ben Bernanke.

He barely has time to settle into his big leather chair at the Federal Reserve, and there goes former Chairman Alan Greenspan, whispering into the ear of Wall Street high-rollers and sending financial markets into a tizzy.

Nobody is saying precisely what pearls of wisdom Greenspan dropped at a very exclusive dinner for hedge fund investors hosted by Lehman Bros. last week in New York. Rumors of the former chairman’s bullishness were enough to send market interest rates higher — and to draw the ire of some economists and editorialists who felt left out.

Even though Greenspan’s appearance was subject to modest legal restrictions — he was not permitted to disclose anything discussed in his final meeting with Fed policy-makers Jan. 31 —some said Greenspan should observe a longer period of silence to allow Bernanke to establish himself.

"In turning to profitable work immediately after leaving government service Mr. Greenspan is only following standard U.S. practice," noted the Financial Times in an editorial. "However, a retiring Fed chairman is clearly in a far more sensitive position than a retiring agriculture or education secretary."

In any case it probably will take some time for Bernanke to crawl out from under the shadow of his larger-than-life predecessor.

The former Princeton professor begins the process Wednesday, when he heads to Capitol Hill for his first extensive public remarks since taking over as central bank chairman Feb. 1. Expectations are high that the plain-speaking economist will clarify his views on a range of issues, including just how much further the central bank will go in its rate-hike campaign and how quickly he plans to make changes like setting an inflation target that would make monetary policy more transparent.

Expectations might be too high, said Ed McKelvey, senior economist at Goldman Sachs.

“Being new at the job, Chairman Bernanke is apt to proceed with caution notwithstanding his strong credentials for the job and his prior service on the board,” McKelvey said in a research note. “Better to err on the side of saying too little rather than too much, as more can always be said later.”

Members of the House and Senate will give Bernanke every opportunity to test his new megaphone in two days of testimony on the Fed’s semi-annual economic outlook.

“There is going to be a dance between him and the congressmen,” said Ethan Harris, chief U.S. economist for Lehman Bros. “They’re going to try to get him to talk about all kinds of tangential issues. It will be interesting to see where he draws the line.”

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