By Mick Krever, CNN
In terms of crisis management, Federal Reserve Chairman Ben Bernanke has been the “grown-up in the room,” Financial Times Assistant Editor Gillian Tett told CNN’s Christiane Amanpour on Wednesday.
They spoke moments just after the Fed announced its decision to begin reducing its simulative measures.
Wednesday was Bernanke’s last scheduled public appearance before he hands the reigns over to his expected successor, Janet Yellen.
It was, in other words, his swan song.
Bernanke was “pretty slow and timid” in reacting to the economic bubble, Tett said, but kept his cool when the crisis hit.
“In terms of providing stimulus to the economy” through the Fed’s extensive and unprecedented programs – “he’s done that well.”
“If the Fed now handles the exit well, Bernanke will indeed go down in history extremely well,” she said.
“If however it becomes clear that getting out of these extraordinary stimulus measures is going to be extremely difficult and potentially create more convulsions, it’s quite possible that in fact there will be a rewrite of Bernanke’s tenure in the future.”
The Fed’s strategy for getting out of those “extraordinary measures,” she said, is a bit like “a child with a Band Aid or a sticking plaster.”
The child “knows they need to rip it off, knows that it’s going to hurt, but actually the sooner you get on with it the better,” she said.
The Fed announced that it would reduce its program of buying $85 billion of bonds per month by $10 billion, in effect taking its foot slightly off the gas pedal.
To use another analogy, Tett said, the U.S. central bank is trying to land a plane a gently as possible, so that the passengers, “i.e. all of us in the economy,” hardly feel it.
“In many ways, that’s a sensible way to do it,” she said, but added that there are two potential problems.
First, the Fed’s policy is designed to take place over several years, and it’s “going to be very hard to do that over an election cycle.”
Second, the data the Fed has about the economy, which is how its members make their decisions, is “patchy.”
“So it’s a bit like a pilot whose radar isn’t quite working well trying to land this plane,” she said, “potentially in the middle of a storm.”
The stock market’s immediate reaction to the decision was quite positive; but Tett said that despite the American economy’s relative strength, most of the gains have gone to the wealthy.
“One of the big questions hanging over not just the Fed but the President too is can you actually create a sustainable recovery if the middle class isn’t feeling much better off. We just don’t know right now.”