Bernanke shows humour as scrutiny on Fed succession grows

US central bank chief jokes of returning to teaching as scrutiny grows over who will succeed him when his second term expires in 2014

PUBLISHED : Tuesday, 04 June, 2013, 12:00am
UPDATED : Tuesday, 04 June, 2013, 3:57am

Never believe United States Federal Reserve chairman Ben Bernanke does not have a sense of humour.

"I wrote recently to inquire about the status of my leave from the university, and the letter I got back began, 'Regrettably, Princeton receives many more qualified applicants for faculty positions than we can accommodate'." Bernanke said in remarks to new Princeton University graduates in his commencement speech.

I truly believe Ben [Bernanke] prevented Great Depression 2.0
Elizabeth Bogan, Princeton Economic lecturer

"Note to journalists: This is a joke," said a footnote attached to the text provided to reporters.

But behind the joke, and Bernanke's care in making sure journalists did not miss it, is the mounting obsession over who may take charge of US monetary policy for the world's largest economy after January 31, 2014, when Bernanke's second term is due to expire.

Bernanke has said little about his future at the Fed, where he took over as chairman in 2006.

Talk that he is reluctant to accept a third term has been swirling for months, and speculation that he plans to leave the post got a boost in late April when the Fed confirmed he will skip the annual Jackson Hole monetary policy symposium in August due to a scheduling conflict.

Bernanke's absence would mark the first time in 25 years that a Fed chairman has not attended the conference, which draws top central bankers from around the world.

Fed vice-chairwoman Janet Yellen is most often mentioned as his likely successor.

Bernanke, who led the Fed's response to the financial crisis and the Great Recession that followed, taught economics at Princeton before joining the Fed Board of Governors in 2002. His public service leave from Princeton expired in 2005. He became Fed chairman in 2006.

He had nothing to say in his speech about monetary policy, and little to say about economics, except that it "is a highly sophisticated field of thought that is superb at explaining to policymakers precisely why the choices they made in the past were wrong. About the future, not so much".

Bernanke's visit stirred speculation among former colleagues about what his future holds. Bernanke, 59, has repeatedly declined to comment on his plans.

"I would love him to return to Princeton," said Alan Blinder, a Princeton economist and a former Fed vice-chairman, who nevertheless said he believed Bernanke probably would not return.

Bernanke showed a collegial leadership style at Princeton and honed a scholar's command of Depression-era economics that helped him battle the financial crisis, said Elizabeth Bogan, who teaches economics and worked in Bernanke's department at Princeton.

"Ben realised that just plain traditionally running the Fed by buying bonds, Treasuries, wasn't enough," Bogan said. "I truly believe Ben prevented Great Depression 2.0."

At a March 20 press conference, Bernanke said he had "spoken to the president a bit" about his future and that he feels no personal responsibility to stay at the helm until the Fed winds down its unprecedented policies to stimulate the economy.

Some of President Barack Obama's economic and political advisers have said Bernanke is exhausted and wants to return to private life after spending most of his time as chairman fighting the financial crisis and its aftermath.

A quarterly poll of investors, analysts and traders showed that 34 per cent of respondents saw Yellen as the most likely choice to succeed Bernanke when his term ends. The second-most likely was Bernanke himself, at 27 per cent.

Bernanke advised students in his Princeton speech to be on the lookout for the unexpected twists and turns in life.

Reuters, Bloomberg