Bernanke says moving central bank to more openness has been a top priority

WASHINGTON – Federal Reserve Chairman Ben Bernanke said Wednesday that increasing the Fed’s openness and accountability has been a top priority of his during the eight years he has been leader of the central bank.

Bernanke said the central bank, which is marking its centennial this year, was reluctant during its early years to explain its actions or otherwise engage with the public. But he said that began to change in the 1990s and the process has accelerated during his time as chairman.

Bernanke’s comments came at a town hall meeting the Fed held Wednesday night with teachers gathered in Washington and participating by webcast around the country. It was the third teacher town hall meeting for Bernanke, who will be stepping down as Fed chairman on Jan. 31.

“Increasing the Fed’s transparency, openness and accountability has been one of my top priorities as chairman,” Bernanke said in his remarks. “A more open Fed, in my view, is both a more effective and more democratically legitimate institution.”

Bernanke has pushed for a number of changes to make the Fed more open, including expanding the information provided in the policy statements it issues after its meetings. Bernanke also started the practice of holding news conferences after four of the eight meetings each year to answer questions about the Fed’s policy moves.

Bernanke is leaving the Fed when his second four-year term ends. Before coming to the Fed, Bernanke had been a highly regarded economics professor at Princeton.

In his comments, Bernanke said that it is important for teachers to educate their students about economic matters, including how the Fed’s actions can influence the economy through the central bank’s control over interest rates.

Bernanke said that to help in that effort, the Fed had prepared a series of three lesson plans that examine the Fed’s first 100 years.

The Fed came into existence after President Woodrow Wilson signed the Federal Reserve Act on Dec. 23, 1913.

Bernanke fielded a range of questions from the teachers. Asked how to make monetary policy interesting to students, Bernanke suggested that teachers make sure that students understand how interest rates can affect economic growth. The Fed manages economic growth by pushing interest rates down to stimulate economic activity or by pushing rates up to slow growth and make sure inflation does not get out of control.

“You can think of interest rates as being a fuel for the economy,” Bernanke said. “Interest rates are a lever for moving the economy.”

Asked about what he wanted his legacy to be, Bernanke said it had been an “eventful” eight years, a period that covered the country’s worst financial crisis and deepest recession since the 1930s.

“As you know, my term comes to an end in a few months,” Bernanke told the teachers. “I wish I was leaving with the unemployment rate at 5 per cent instead of 7 per cent, but I think we have done a good bit to support this recovery and it is important that we continue” to provide support.