The Pracademic and the Fed: The Leadership of Chairman Benjamin Bernanke

Abstract

When President Barack Obama nominated Ben Bernanke for a second term as chair of the Federal Reserve Board in August 2009, he emphasized Bernanke's “bold action and outside‐the‐box thinking” in preventing the recent financial collapse from turning into another Great Depression. While many saw this renomination as providing monetary policy stability and necessary institutional continuity during the crisis, Bernanke's “bold action” has generated robust criticism, mainly because Bernanke initiated fundamental reforms of traditional Fed practices. How has Bernanke's leadership style at the Fed evolved as the financial crisis of 2008–2009 has unfolded? Did his prior academic experience influence his decisions? What are the long‐term implications of Bernanke's innovative strategies for the Federal Reserve as an independent, powerful, policy making institution, traditionally one that possesses tremendous financial and political autonomy? If you want to build a factory, or fix a motorcycle, or set a nation right without getting stuck, then classical, structured, dualistic subject‐object knowledge, although necessary, isn't enough. You have to have some feeling for the quality of the work. You have to have a sense of what's good. That is what carries you forward … It's not just “intuition,” or unexplainable “skill” or “talent.” It's the direct result of contact with basic reality … —Robert M. Pirsig, Zen and the Art of Motorcycle Maintenance There are no atheists in foxholes and no ideologues in financial crises. —Benjamin Bernanke, 20091