President Bush Monday named Ben Bernanke to succeed Alan Greenspan as head of the U.S. central bank, the Federal Reserve.
Mr. Bernanke, 52, is highly respected in both academic and financial circles. He graduated with highest honors from Harvard University and obtained his doctorate in economics from Boston's MIT. He taught at Stanford University, and was chairman of the economics department at Princeton University before being named by President Bush to a seat on the Federal Reserve Board in 2002. He held that position until June of this year, when Mr. Bush asked him to become his chief economist, chairman of the Council of Economic Advisors.
Mr. Bernanke's scholarship focused on monetary policy, adjustments in the money supply and interest rates that are the principal business of a central bank. He specialized in the causes of the great depression of the 1930s and endorsed analyses that concluded that inappropriate monetary tightening by the Federal Reserve was the principal cause of this severe, decade-long economic downturn and accompanying deflation.
While Mr. Bernanke's views on some economic policy issues are not well known, at a congressional hearing last week he did reveal his opinions on several matters. He spoke strongly in favor of President Bush's tax cuts, arguing that they contributed significantly to economic growth. He dismissed criticism that the United States is a net exporter of jobs to low cost economies, a practice known as out-sourcing.
"We benefit from foreign direct investment," said Mr. Bernanke. "Many Americans are employed by foreign companies with plants in the United States, for example in the automobile industry. So, trade is a two way street. I think, it is important to protect Americans who lose their jobs, or whose jobs come under pressure from international trade. But, I think, we need to be careful not to embrace economic isolationism."
Similarly, Mr. Bernanke was asked what should be done about the large U.S. budget deficit and the large foreign trade deficit, also known as the current account deficit.
"I agree that we need to bring the current account deficit down, and I believe we can do so over a period of time," he added. "Doing so requires more savings in the United States, including reductions in the U.S. budget deficit."
In announcing Mr. Bernanke's selection, which must be approved by the U.S. Senate, President Bush said he would be succeeding a legend. Alan Greenspan, 79, has been the chairman of the Federal Reserve for over 18 years. He is regarded as a giant among central bankers, and is sometimes called the second most powerful person in the United States. One of the Fed's key jobs is to fight inflation by setting the key U.S interest rate.
Mr. Bernanke says that if approved, he will attempt to build on Mr. Greenspan's impressive record. Mr. Greenspan's term as chairman of the Fed expires at the end of January.