Bernanke Returns to Academic Roots to Defend Fed's Existence

By Rich Miller and Joshua Zumbrun

Federal Reserve Chairman Ben S. Bernanke returned to his roots as a university professor today, seeking to explain and justify the existence of the central bank ahead of the 100th anniversary of its founding next year.

Bernanke told 30 students at George Washington University that central banks play a key role in the modern monetary system as guardians of economic and financial stability.

His hour-long lecture, followed by questions from the students, is the first of four planned talks on the history of the Fed and is part of what public relations specialist Richard Dukas called a “P.R. offensive” to buff the central bank’s tarnished image. The Fed is being attacked from both the left and the right, with liberals criticizing it for not doing enough to bring down unemployment, and conservatives blaming it for doing too much and risking faster inflation.

Bernanke’s return to the milieu where he spent more than two decades will give the Fed’s top policy maker an opportunity to “set the narrative” on the central bank’s role during and after the financial meltdown, said Princeton University professor and former Fed Vice Chairman Alan Blinder. “The question of who gets to write the history is an important one.”

If Americans lose faith in the Fed’s ability to manage the economy and contain inflation, that will rob monetary policy of some of its potency, according to Dana Saporta, director of U.S. economics research for Credit Suisse Securities in New York. Policy has “less effect the less confidence the public has in the Fed,” she said.

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