Should Bernanke Be Less Transparent?

The newly elected President takes office January 20, 2009, and Fed Chairman Ben Bernanke’s term ends Jan. 21, 2010. Bernanke has to be renominated by the president and will be on the Board of Governors until 2020. It's a 14-year term. 

Why do I mention this? Yesterday morning, as I covered Bernanke's speech to the Independent Community Bankers of America (about 1,600 bankers in the room), I along with my guest thought, "Why now?" He just spoke for two days last week in his semi-annual testimony. One theme being echoed in the markets is, how much transparency is a good thing? Back in November Bernanke said that he would make economic policy and targets available to all Americans, that he would forecast four times a year instead of two, that the forecast would cover more "stuff" and would look out three years instead of two. Many applauded him, myself included. His predecessor, Alan Greenspan, held his cards close to the vest. It was harder to read him, know what was going on in his mind because he was very picky about where and when he chose to speak. You knew you could count on the FOMC minutes and the semi-annual Humphrey-Hawkins testimony. 

According to my favorite internal Fox Business economist, Mark Lieberman, who I begged to gather these stats, since Bernanke became chairman at the end of 2006, he has made 48 speeches and cut rates 225 bps or 2 1/4% since September. The Fed Funds rate was 5.25% in September of 2007 and is now at 3%, with markets anticipating another 100 bps or 1% down to 2%. Greenspan in 2001 and 2002, including 9/11, made 35 speeches and cut rates 475 bps or 4 3/4%. The Fed Funds rate was 6% in January of 2001 and went down to 1.25% after the Dec 2002 meeting.

Why is this significant? Because the vast majority of Bernanke's 48 speeches have occurred since he opened the doors to transparency. The problem? When he speaks, we get scared! It's like reading the headlines of the newspapers every day. The news isn't exactly inspiring. Sure we don't want the chairman or anyone else in the White House economic team to sugarcoat the news. But, on the other hand, the more you discuss delinquencies, subprime losses, credit markets, home foreclosures, rising inflation and declining growth, the more you make people question their own economic well being. Many of my guests have suggested that the media is partly to blame, that we add to the fear in the markets. Might the Fed (every Fed president and governor who speaks at events each day) and the chairman, be just as responsible. Do you want a daily update from policy makers or do you want time to see how their initiatives are digested in the economy and in the marketplace? When our kids go to school they get quarterly report cards, not daily.

Should Mr. Bernanke stick to four times a year and give us something to look forward to? Or should he continue to do what he is doing? Tell me, what do you think?

If this article below is what I have to look forward to on a daily bais, you're worrying me...

Jefferson County's debt crisis worsens; Moody's hints that overall finances are at risk

Overall county finances called possibly at risk

Wednesday, March 05, 2008

 RUSSELL HUBBARD and BARNETT WRIGHT

News staff writers

Jefferson County's crumbling finances eroded further Tuesday, after a credit rating was cut to junk and Wall Street raised suspicion that overall county finances are tainted by the sewer-debt crisis.

Moody's Investors Service, which rates the creditworthiness of borrowers, said "cash flows are insufficient" to meet mounting interest payments on $3.2 billion of bonds sold to pay for sewer expansions and court-ordered improvements. The county might miss payments within a week because of its "depleted cash position," Moody's wrote.

For full article, go to http://www.al.com/news/birminghamnews/index.ssf?/base/news/120470864884880.xml&coll=2