Bernanke Hawks Post-Greenspan Plan

Ben Bernanke (R) flanked by Alan Greenspan (L) speaks after being nominated by U.S President George W. Bush to be Federal Reserve chairman October 24, 2005 in Washington, DC. Greenspan will leave the Federal Reserve at the end of January.
Getty Images
White House chief economic adviser Ben Bernanke pledged Tuesday to run the Federal Reserve independent of political influences, a promise aimed at reassuring investors and central bankers worldwide as well as the American public.

Bernanke, the president's choice to head the Federal Reserve after Alan Greenspan retires, made his commitment in prepared remarks to the Senate Banking Committee, which is holding a hearing on his nomination.

"I assure this committee that, if I am confirmed, I will be strictly independent of all political influences and will be guided solely by the Federal Reserve's mandate from Congress and by the public interest," Bernanke told lawmakers.

He pledged to maintain "continuity" with Greenspan's policies, saying it is a "top priority." Bernanke also said he would move slowly and seek to build a consensus on the notion of inflation targeting — that is numerically spelling out acceptable bounds for inflation. That's one area where Bernanke and Greenspan differ. Bernanke supports a numerical inflation target, Greenspan doesn't.

"I will take no precipitate steps" on inflation targets, Bernanke said. "This matter requires further study at the Federal Reserve as well as extensive discussion and consultation."

Bernanke, if confirmed as expected, will take on the Fed at a time when the economy faces a number of challenges, including bloated budget and trade deficits, worries about whether the high-flying housing market will make a safe landing, fears about high energy prices and if they'll feed inflation and concerns about the lackluster jobs market.

Bernanke got the paparazzi treatment as he sat down at the witness table Tuesday, CBS' Howard Arenstein reports. And he has big shoes to fill — but even Democrats, such as Connecticut Sen. Christopher Dodd, seem impressed.

"I want to acknowledge at the outset that the president has made a superb decision in nominating you," Dodd said.

Dodd asked Bernanke about the government's budget deficit, which totaled $319 billion this year, the third-highest ever on record.

"I think budget deficits are a problem," Bernanke said. "I think it is important to continue to reduce budget deficits."

But, he added: "I'm going to begin now, I think, a practice on not making recommendations on specific tax or spending proposals."

Greenspan, 79, received a large amount of criticism from Democrats when he provided support for President Bush's call for massive tax cuts in 2001.

Bernanke, 51, is expected to win the panel's endorsement and get a positive vote in the full Senate. He is a former Princeton professor and Fed governor who now serves as chairman of the White House Council of Economic Advisers.

Some of his statements before the Senate panel seemed to carry the same tone as those of recent Supreme Court nominees.

"Good monetary policymaking evolves over time as we learn, we learn from the experience of other countries and from our own experience," Bernanke said Tuesday. "I intend to be flexible and to learn from experience."

Some Democrats, who questioned whether Bernanke would run the Fed fully independent from the Bush administration, were seeking assurances on this front.

"It is my expectation that the Fed chairman, even when he is a former White House adviser, refrains from being a cheerleader for the policies of either party," said Sen. Tim Johnson, D-S.D.