Pitching Curves
Outspoken Ben Bernanke is shaking up the Federal Reserve
As a graduate student in economics at the Massachusetts Institute of Technology in the 1970s, Federal Reserve governor Ben Bernanke was obsessed with two of the 20th century's biggest sources of misery: the Great Depression and the Boston Red Sox. "I missed a lot of classes my first fall at MIT because of the Boston-Cincinnati World Series," he says. The BoSox lost and have brought Bernanke mostly sorrow since. "I've been trying to wean myself from them since 1986," the year of their heartbreaking series defeat to the Mets, he says. The Depression, on the other hand, has been propelling Bernanke's career and shaping his thinking for nearly three decades.
Bernanke's thinking matters a great deal these days. Tapped by the White House in August 2002 to fill an unexpired term on the central bank's governing board, the Princeton University economist couldn't have been appointed at a more pivotal time. As a leading monetary policy scholar and now the resident intellectual at the Fed, Bernanke and his innovations on fine-tuning the economy will be important to maintaining the momentum of a still uncertain recovery while remaining ever vigilant for signs of overheating. At the same time, with job gains anemic and a presidential election looming, Bernanke and his fellow policymakers will find themselves under enormous pressure to keep the stimulus throttle open.
With Fed Chairman Alan Greenspan edging closer to retirement--almost certainly by 2006--Bernanke has quickly emerged as one of the top candidates to fill the maestro's shoes. That status has thrust his controversial ideas front and center, potentially altering the very way the Fed goes about achieving its congressionally mandated objectives of maximum employment, stable prices, and moderate long-term interest rates. "Bernanke is one of the liveliest minds to sit on the Fed board in a generation," says former Fed governor Laurence Meyer.
A meditative man and quiet Republican ("He does not wear his ideology on his sleeve and never, ever lets it affect his work," says economist Alan Blinder, a longtime friend and colleague), the 50-year-old Bernanke seems an unlikely firebrand. Studious and even bookish are adjectives that come to mind. Raised in Dillon, S.C., a farm hamlet near the North Carolina border, Bernanke, son of the town druggist, was an academic standout from the start. In high school he earned 1590 on the SAT, the highest score in the state. Yet perhaps Bernanke's greatest early source of mingled pride and disappointment came in sixth grade. He won the state spelling bee, but by adding one too many "i"s to the word "edelweiss"--the mountain flower made famous by the 1965 movie The Sound of Music --Bernanke lost the national championship and a chance to appear on The Ed Sullivan Show. "We lived in a small town that had no movie theater," Bernanke explains. (Can he spell it now? "I'll leave that as an open question," he says.)
Epiphany. Bernanke took highest honors in economics at Harvard in 1975 and a Ph.D. from MIT in 1979. At MIT, Bernanke began a lifelong search for what he calls "the holy grail of macroeconomics," the roots of the Depression. Those years were "a fascinating period of political and economic folly and genius," he says, and "a situation where bad economic thinking had very large and direct effects on human welfare, including being a major cause of World War II." Studying that cataclysm is akin to studying earthquakes to learn about geology. "Such a huge event gives you much better insight into the underlying workings of the system."
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