As the state of the declining global economy worsens, the world turns to the American economic powerhouse for direction. With the Obama administration's promises of recovery, transparency and accountability for the economy, much of the burden falls onto the shoulders of the Federal Reserve Chairman Ben Bernanke. The Fed, which sets the nation's monetary policy and regulates banks, is immersed in trying to keep the U.S. financial system from cratering.
Today, Bernanke attended President Obama's daily economic briefing to work on solving the increasing array of economic problems, and tomorrow he will set out his plan for regulating the banks in a speech at the Council on Foreign Relations.
Anointed by Newsweek as the fourth most powerful person in the world, Chairman Bernanke has the unenviable position of trying to steer the economy through a recession with no end in sight.
Despite a growing body of negative news, Bernanke has maintained a cautiously optimistic tenor in his remarks regarding recovery from the recession.
"If actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measure of financial stability," Bernanke said on Feb. 25, "there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery."
Like the Obama administration, Bernanke is trying to stay upbeat, but with the Dow losing hundreds of points weekly and the bottom nowhere in sight, the positive spin is creating a credibility gap. On the other hand, painting a darker picture of the economic outlook won't help to overcome the negative mentality that is dragging down the economy.
Bernanke, as well as Mr. Obama's economic team, has been making the rounds on Capital Hill, trying to calm investors and bring liquidity and confidence back to the market, but without much effect.
Last week, the Dow dipped below 7,000 for the first time in 12 years. In February, employers axed 651,000 jobs, pushing the U.S. unemployment rate to 8.1 percent, the highest since 1983. The Mortgage Bankers Association recently reported that a record 5.4 million American mortgage holders, almost 12 percent, were at least one month late in making payments or in foreclosure at the end of last year. The world economy is on track to shrink for the first time since World War II, according to the World Bank.
In recent weeks Bernanke, preceded in his job by the Alan Greenspan who oversaw the Federal Reserve for nearly 20 years, has been overshadowed by all the president's men, led by Treasury Secretary Timothy Geithner, Director of the National Economic Council Lawrence Summers and Peter Orszag, head of the Office of Management and Budget.
Prior to joining the public service ranks, Bernanke was a Princeton University professor and wrote books, including "Essays on the Great Depression."
His four-year term as chairman of the Federal Reserve is set to end in January next year, and the mild-mannered academician might be thinking about adding job hunt and book contract to his to-do list in the coming months. Following his tenure as Federal Reserve chairman, Bernanke's next assignment could be writing a book of essays analyzing the second Great Depression.
Dan Farber contributed to this story.
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