Washington – Ben Bernanke, the president’s chief economist, told senators Tuesday he’ll continue the policies of Alan Greenspan if confirmed as Federal Reserve chairman and will make sure the central bank remains free of political influence.
Senate Banking Committee members, at a three-hour hearing on President Bush’s choice to head the Fed after Greenspan retires, largely expressed confidence in the man who would take over a position seen by many as the second-most influential job in America.
Maintaining continuity with Greenspan’s policies is a top priority, Bernanke said.
“I intend to be flexible and to learn from experience,” he said. “But I believe the right starting point is the point where we currently are, that Chairman Greenspan has demonstrated in his policymaking.”
Bernanke also sought to assure lawmakers, investors and the public that he would make decisions on interest rates and other matters based on economic considerations, not political ones.
If confirmed, as expected, Bernanke will lead the Fed at a time when the economy faces challenges, including bloated budget and trade deficits and worries about whether the high-flying housing market will crash.
There also are concerns about high energy prices and the lackluster jobs market.
Bernanke, 51, is a former Prince ton professor and Fed governor who now serves as chairman of the White House Council of Economic Advisers. Lawmakers and the administration want him ready to take over when Greenspan retires Jan. 31, after 18-plus years at the helm.
Senators intend to act on Bernanke’s nomination “as soon as possible,” said committee chairman Richard Shelby, R-Ala.
Bernanke said he would move slowly and seek to build a consensus on the notion of inflation targeting – that is, numerically spelling out acceptable bounds for inflation. Bernanke supports a numerical inflation target; Greenspan doesn’t.
On other issues, Bernanke:
Didn’t foresee a major change in foreigners’ appetites to hold U.S. dollar-denominated investments. That’s important because foreigners are financing the country’s massive trade deficits. If such investors sour on the United States, that could send stock and bond prices plunging and interest rates soaring and hurt the overall economy. The trade deficits should be whittled over time, but it “won’t happen overnight,” he said.
Urged China to move forward on a more flexible currency. U.S manufacturers say Beijing is keeping its currency artificially low, giving China a big trade advantage over U.S. companies and contributing to the loss of American factory jobs.
Cautioned that long-term budget deficits and the upcoming retirements of baby boomers who will be drawing Social Security and Medicare benefits represent “a very serious challenge to our economy.”
