Current, past Federal Reserve leaders field questions on work
WASHINGTON — Janet Yellen was put on the spot about whether she made a mistake in raising interest rates in December. Ben Bernanke was quizzed about what it felt like to be called a traitor by the governor of Texas.
Alan Greenspan was asked if he purposely sought to confuse Congress with his answers. And Paul Volcker was queried about being hung in effigy after he pushed interest rates to levels not seen since the Civil War.
The event was an unprecedented gathering of leaders of the Federal Reserve — past and present — to discuss what it feels like to hold what is considered the world’s most powerful economic policy-making job.
The four Fed leaders appeared Thursday evening at an event to launch a speaker’s program honoring Volcker at the International House in New York, a residential dormitory for foreign students. Greenspan appeared by video link from Washington.
Together, the tenures of the four participants cover more than one-third of the Fed’s 102-year history. Their leadership included the double-digit inflation of the 1970s, the global banking and financial market crises of the 1980s and 1990s and, beginning nearly a decade ago, the worst financial crisis and recession since the Great Depression.
Fareed Zakaria of CNN, who moderated the discussion, asked how the four felt in a job with “so much concentrated power” that opened them up to criticism when the economy was not doing well.
Greenspan, who was often accused of trying to dodge tough questions at congressional hearings with big words and incredibly long sentences, did not deny employing that tactic. But he said, “The real problem is that monetary policy is very largely economic forecasting and our ability to forecast is significantly limited and we have to keep the context of what we say in the context of what we know.”
Bernanke said he didn’t like it in 2011 when he was called a traitor by Rick Perry, who was then governor of Texas and a Republican presidential candidate. But he said he realized that criticism came with the job, especially in times when the Fed was trying to pull the country out of the worst recession since the 1930s.
“We had tremendous responsibilities to address these terrible risks,” Bernanke said. “I didn’t take the job for adulation.”
Volcker’s policy of high interest rates contributed to pushing the country into two recessions in the early 1980s. But he said even with unhappy farmers and home builders attacking the central bank’s policies, the Fed could not have done what it did without broad support from the public for the central bank’s attempts to deal with a prolonged bout stagflation, a toxic combination of high inflation and weak economic growth.
“People were unhappy with malaise and inflation going up,” Volcker said. “They felt we were doing something.”
Yellen, who succeeded Bernanke in February 2014, was quizzed about whether she felt the Fed’s rate hike in December, a quarter-point move, had been a mistake.
In January, the global economy slowed and financial markets went into a tailspin triggered by falling oil prices and increased weakness in China.
“I certainly don’t regard it as a mistake,” Yellen said. She said despite the global weakness, the U.S. economy remains on a solid course.
She also disputed the suggestion that the Fed’s low rates could be fueling a bubble economy.
“This is an economy on a solid course, not a bubble economy,” she said, during the hour-long program.