Issue of the week: Bernanke’s confidence crusade

Ordinarily, the chairman of the Federal Reserve doesn’t give interviews to 60 Minutes, said Neil Irwin in The Washington Post. By tradition, the only time we get to hear a Fed chairman speak is when he testifies to Congress. But as Ben Bernanke told CBS reporter Scott Pelley in an interview aired this week, “it’s an extraordinary time,” and he wanted a chance to “talk to America directly.” What he had to say was largely intended to reassure an edgy nation. The recession, Bernanke predicted, would probably end this year, with a recovery “picking up steam over time.” And by “printing money,” he said, the Fed would encourage banks to begin lending again. Fending off charges that he has been overly concerned about the needs of Wall Street, Bernanke declared that the only reason he cares about Wall Street at all is “because what happens on Wall Street matters to Main Street.”

Given the pervasive gloom, Bernanke no doubt “felt he had to say something upbeat to build consumer and business confidence,” said Douglas McIntyre in the financial website 24/7Wallst.com. But his spotty record as a forecaster undermines his message. Recall that in April 2008, Bernanke told Congress that the economy would contract only “slightly” in 2008 and that growth would resume in 2009. We know now that the economy shrank by a shocking 6.2 percent in the last three months of 2008, and that conditions this year are even worse. And yet, with the first quarter coming to a close, Bernanke insists that the economy can climb out of its trough within nine months. Call that confidence if you want. I call it “baffling.”

Why knock Bernanke’s performance on television when there’s so much to criticize about his performance in office? said Paul LaMonica in CNNmoney.com. There certainly have been “some notable flaws” in the Fed’s rescue efforts. The Fed, for instance, has yet to fulfill its months-old promise to buy longer-term Treasury bonds; that’s a problem, because consumer lending rates, from mortgages to car loans, are pegged to long-term bond rates. Because of the Fed’s inaction, those rates remain stubbornly high. And though Bernanke took pains to present himself as a regular guy on 60 Minutes, he “needs to be even more blunt and honest with the public about the daunting task the nation faces.”

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But with this global meltdown, there is only so much the U.S. government can do, said David Ignatius in The Washington Post. Central bankers in Asia and Europe have been sitting on their hands, waiting for “America, with its multitrillion-dollar stimulus and rescue programs, to rev up the world’s sputtering engine.” But let’s not forget, we got into this mess because America “loved gorging on cheap foreign imports,” while foreigners prospered by “shoveling goods into the insatiable U.S. market.” Unless Europe and Asia encourage consumption at home instead of depending on America’s “lopsided effort” at stimulus, they will set that destructive cycle in motion again.