Sixteen Questions for Dr. Bernanke’s Press Conference

Mmmm… I live near DC, but what does it take to get an invite to the Fed’s press conference?  One e-mail, four phone calls, four messages… and not even the courtesy of a reply?  What, does the Fed think they run this place?!  (Uh, maybe.)

I mean, it would be reasonable to receive a response that says, “Sorry, bloggers are NOT a part of the press, no matter how much reach you have.  We only deal with REP-utable media.  You are not an impartial reporter of information.”  But being ignored is just tacky.

I’m assuming that I will have no access to the press conference.  So, I’m writing out a list of questions that those in the press can use if they like.  Some questions are normal ones, some less so.  To those that follow me that may have contact with those who are invited to the press briefing, I ask that you pass the questions along to them.  Thanks.

1) Why has the NY Fed’s open market’s desk been buying predominantly intermediate nominal Treasuries, but with TIPS, predominantly the long end?  Is the Fed trying to purchase a long-dated inflation hedge?

2) Growth in developing world means more competition for food and energy supplies, and other commodities, which are forcing prices up in those areas.  Why does the Fed focus on so-called “core” measures of inflation, when food and energy prices (though volatile), always seem to go up more than the “core?”

3) If you are trying to smooth out fluctuations in inflation, wouldn’t it be better to use the median or a trimmed mean, rather than ignore data, particularly data that minimizes the effect of inflation for households for which food and energy are a large portion of their budgets?

4) In 1992-1993, the Fed held the Fed Funds rate down at levels that produced a very steep Treasury yield curve.  When the Fed began tightening policy, in 1994 the bond market had annus horribilis, with a self-reinforcing sell-off in the Residential Mortgage-Backed Securities market.  As you begin removing policy accommodation, what assurances can you give that we won’t have a similar selloff?

5) How are you regulating banks differently now than you were in 2005?

6) Why did the Fed resist legitimate FOIA requests so vehemently?  In the insurance industry, every asset is public.  Why did the Fed and the banks resist disclosure of items that should have been regarded as trivial?

7) Why did state-regulated insurers come through the crisis better than federally-regulated depositary institutions?

8) Why does the Fed employ so many Ph.D. Economists when the economics profession proved incapable of forecasting the recent crisis, when all anyone had to do was look at overall debt levels relative to GDP to see that we had surpassed the levels of the Great Depression?  Why employ so many from a failed area, when it would be better to hire History Ph. Ds. who might note the problem?

9) Why is the Fed so big in terms of employment, when all you do is set monetary policy, and pretend to regulate financials?  Why can’t the Fed  be slimmed down to provide a greater payback to the US Treasury?

10) Are you concerned that the Fed’s balance sheet is a record 16-17% of US GDP?  If you begin to shrink your balance sheet, what will the effect be on the banks, lending and the general economy?

11) Some suggest that the removal of liquidity will prove difficult.  So far the Fed has minimized price inflation, but how will you manage the removal of accomodation from QE2, particularly if inflation begins to accelerate?

12) If you find the US in stagflation one year from now, how will your policy be different from that of the Fed in the late ’70s?

13) What evidence is there that quantitative easing works?  Japan is still a basket case, and they have done it the most.  Ignore theory, and give concrete examples.

14) Quantitative easing has forced investors to take more risk, particularly retirees who need income.  Is it fair to engage in an economic policy that is unfair to investors and seniors?  Why harm savers who deserve a good return on their savings?

15) Don’t you think that holding interest rates so low just builds another bubble?  Low interest rates relative to growth in GDP often fosters speculation that blows up once the economy overheats and the Fed adjusts policy.  Why engage in such policy?  Why not aim for something more sustainable, a la Knut Wicksell?

16) Why is the Fed sucking down 50% of the US Government’s issuance of debt?


Okay, so I am biased and not politically realistic.  Yet I am trying to be real with the economy as it is, and the distortions that the Fed has created through their horrendously loose monetary policy.  I firmly believe that the history books will condemn Greenspan, and to a slightly lesser extent Bernanke, for their mishandling of monetary policy and supervision of financial companies.


  • andrew 123 says:

    Would the following question be appropriate? Chairman Bernanke, how important is it that the Amercan people have faith in the Federal Reserve? If there came a point in time where the majority of Americans thought you were untrustworthy and incompetent, would you consider resigning?

    • Andrew, I think that’s fair. That can be question 17. Here’s 18. Chairman Bernanke, there’s a disconnect between the general public and the Fed. People do not think in terms of what is better for them, but in terms of what is fair. “Why does he get that and I don’t?” would be a common lens to view matters through. To that end, all the bailouts that the Fed did struck the American public as manifestly unfair. Why did you bail out financial institutions rather than letting them fail, and only protect depositors? Why did you bail out financial institutions rather than create mutual banks so that average businesses and consumers who wanted credit could get it? As it was, banks merely sat on the liquidity that you provided, and did little for the good of average Americans. That’s why the average person views the actions of the Fed as unfair.

  • andrew 123 says:

    Ok. In the hope that an intrepid reporter is reading this blog, I have another question I would like asked:

    In your confirmation hearing, you assured the Senate that you would not monetize the debt, yet 6 months later, in the words of your fellow governor Thomas Hoenig, commenced “monetizing the debt:”. Given that you broke your promise, why should anyone believe any trust anything you say?

  • andrew 123 says:

    I just realized that the really good questions have already been asked:

    Sorry for venting on your blog. I hope I haven’t been inappropriate.

  • says:

    Why no invite? Remember the famous words of congress – “money talks”. While it may not work with Ben, donate sufficient $ to a congressman and I am sure you can find one who would ask the questions the next time Ben is up on the hill.

  • Doug says:

    David, he did address many of these questions on his 60 Minutes appearance. And as to getting an invite, don’t you want to spend time managing customer portfolios? Where would you find the time.

    On many of the other questions, a good money-and-banking text would give you the answers. QE is not monetizing, because velocity has fallen.

    I like your blog, David. But this one seems to be overly cynical. I read the research reports from three or four regional Fed publications a month. They’re very good, cutting edge stuff. And they give me fodder for my (admittedly much smaller) blog.

    When cynics reflect the views of cynics, you get a cynical echo chamber.

    Happy Easter!

    • Doug, I make time for public policy. My blog is hybrid. (And, why else am I reading a books by Minsky and Keynes at present?)

      I have never watched the 60 minutes appearance, I don’t own a television, but if he answered many of those questions, it was not echoed in the media.

      A good money and banking text does not address the issues we are facing today.

      I said nothing about monetization. The Fed is financing, and causing banks to adjust their balance sheets, so that the Fed can buy a lot of Treasuries.

  • Random Blowhard says:

    1) Yes
    2) So we don’t have to increase Social Security payments
    3) Ignoring data is politically expediant
    4) None, but it’s that or hyperinflationary collapse
    5) Our job is to “serve the banks” not regulate them
    6) Because the assets are ALL WORTHLESS.
    7) Because they are not the slaves of TBTF banks
    8) Our Wall Street masters command it so
    9) Silence Heretic!!, those who dare question their ruling class masters will be send to Gitmo for re education.
    10) We only serve Wall Street everyone else can f**k themselves
    11) We will obey the orders of our masters the TBTF banks
    12) More bailouts for Wall Street
    14) As long as our Wall Street masters approve, the printing WILL continue
    15) Bubbles make Wall Street rich, when the markets collapse, taxpayers can bail them out AGAIN AND AGAIN AND AGAIN…
    16) Because no one else wants to lend money to a soon to be failed fascist state.
    The United States of Argentina – Yes we will.

  • BodyworkeR says:

    I think all 18 questions are good ones and ought to be put to Bernanke even if he does choose to give evasive answers. He is a politician as well as an economist. Andrew’s YOUTUBE video is very cute but I don’t think it quite covers all the questions. Besides, I’d like to hear Bernanke’s answers.
    My suggestion would be for everyone to take David’s 16 questions, add the two in the comments, and send them as letters to the editor to your favorite newspapers and new magazines. If it comes from enough places maybe some of the reporters who will be there will ask Bernanke at least some of them.

  • RedSt8r says:

    @Doug (04-22) #1 if you return please identify your blog. #2 what does money velocity have to do with monetizing the debt? It has a lot to do with why inflation appears quiet but nothing that I know of to do with monetizing Treasury debt.

  • RedSt8r says:

    My question for Chairman Bernanke:
    With all the Phd’s on staff why is there no attempt to develop policy tools that would enable the Fed and Treasury to combat excessive deflation as well as excessive inflation? It would seem that the Fed has an institutional bias to promote inflation always and everywhere. The Fed declines to discuss deflation tools under the premise of can’t lower interest rates below zero. But of course they can. The Fed can charge banks with Fed deposits above minimum reserves for one thing.
    At this point in our historical development some deflation may be of economic benefit. After all, my $12,500 income in 1975 is now equivalent to $50,100. Not gain, just equivalent according to the BLS calculator. How is that a positive development?

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