four Fed leaders to share thoughts on central bank'south influence

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Source:   —  April 07, 2016, at 6:17 PM

Their plans stir speculation. Their tenures spark debate. Arguably number one holds more sway over the global economy and financial markets than the chairman of the Federal Reserve.

four Fed leaders to share thoughts on central bank'south influence

Their words move markets. Their plans stir speculation. Their tenures spark debate.

Arguably number one holds more sway over the global economy and financial markets than the chairman of the Federal Reserve. And on Thursday evening, all four living Fed leaders, past and present, will collect for a public conversation to get stock of the outsize role each has played.

The four — Janet Yellen, the current Fed chair, and her three immediate predecessors, Ben Bernanke, Alan Greenspan and Paul Volcker — will launch a speaker'south program honoring Volcker at the International House in New York, a residential dormitory for foreign students. With the possible exception of Greenspan, who may get portion by video link, all will collect on site.

The program, called "When the Federal Reserve Speaks, the World Listens," will be guided by Fareed Zakaria of CNN.

Together, the tenures of the four participants cover more than one-third of the Fed'south 102-year history. Their leadership included the double-digit inflation of the one thousand nine hundred seventy, the global banking and financial market crises of the one thousand nine hundred eighty and one thousand nine hundred ninety and, beginning nearly a decade ago, the worst financial crisis and recession since the Grand Depression.

Their conversation is bound to touch on many of the challenges they faced and how they addressed them.

Here'south a see at key events of their tenures:

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PAUL VOLCKER

Volcker served as chairman from August one thousand nine hundred seventy-nine to August one thousand nine hundred eighty-seven. He'd been tapped by President Jimmy Carter to combat a crisis of stagflation — the toxic combination of double-digit inflation and feeble work growth that gripped the U. S. economy after the oil shocks of the one thousand nine hundred seventy. Volcker, then head of the Fed's NY regional bank, told Carter he could fix it.

Fix it he did — by driving interest rates to heights not seen since the Civil War. Those soaring rates triggered two recessions. Yet Volcker succeeded in reducing inflation to acceptable levels — a feat his two immediate predecessors, Arthur Burns and G. William Miller, could not achieve.

"The challenge for Paul Volcker was to be powerful and tough sufficient to do the work that needed to be done, and he was powerful sufficient and tough enough," said Alan Blinder, an economics Prof at Princeton and a former Fed vice chairman.

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ALAN GREENSPAN

Greenspan'south leadership spanned August one thousand nine hundred eighty-seven to January two thousand six — eighteen years and five months, a tenure that's second only to Willliam McChesney Martin's eighteen years and ten months.

Greenspan was first tapped by President Ronald Regan and then was re-nominated by Presidents George H. W. Bush, Bill Clinton and George W. Bush. He was dubbed the "maestro" in a glowing book about his Fed stewardship by Bob Woodward of the Washington Post.

Greenspan gained acclaim for his management of monetary policy to address the one thousand nine hundred eighty-seven stock market crash, the mid-one thousand nine hundred ninety Mexican peso crisis and the late 1990s Asian currency crisis. He pursued policies that helped produce a decade of economic expansion, the longest in U. S. history.

But Greenspan'south reputation was severely tarnished after he left the Fed, once the housing boom collapsed with dire consequences that fed the two thousand eight financial crisis and the Grand Recession of 2007-2009. Greenspan was accused for, among other things, resisting tighter regulation that could've addressed abuses in home lending.

"Greenspan was expert in the fine-tuning of monetary policy that produced a record expansion, but his neglect of regulatory issues helped pave the way for the housing catastrophe," Blinder said.

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BEN BERNANKE

Bernanke served as chairman from February two thousand six to February two thousand fourteen, maybe the most momentous period for the Fed in its more than 100-year history.

Bernanke, a longtime Princeton Prof before entering government service, had been chairman of President George W. Bush'south Council of Economic Advisers when Bush chose him to succeed Greenspan. Though he seemed more the shy academic than an operator suited to the rough-and-tumble of Washington, Bernanke proved a fast study once the financial crisis erupted in the fall of two thousand eight with the collapse of Lehman Brothers. The years he'd spent studying the Fed'south mistakes in responding to the Grand Depression served him in good stead.

Below his leadership, the Fed invoked all its conventional tools, driving its key policy rate to a record low close zero. Then, once those measures were exhausted, Bernanke unleashed extraordinary measures, never tried before, to assistance a rescue a financial system that was verging on collapse.

Among other things, he launched a bond buying program to attempt to hold long-term borrowing rates extraordinary low. He also presided over numerous emergency lending programs for battered corners of the financial system. By most accounts, Bernanke'south actions succeeded, though some critics complained that those very efforts risked laying the groundwork for future financial bubbles.

"Bernanke was viewed by Wall Str as an modest academic when he became chairman, but he'd studied the Great Depression when the Fed did too small and he didn't wish to repeat those mistakes," said David Jones, the author of five books on the history of the Fed.

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JANET YELLEN

The first woman to head the Fed, Yellen was selected by President Barack Obama to succeed Bernanke in February two thousand fourteen. In many ways, her toughest task will be to untwist all the Fed'south extraordinary support measures while ensuring that higher rates don't tip the economy back into recession.

In December, the Fed raised its key short-term rate modestly from record lows but has since kept it unchanged. Yellen has stressed that she foresees a gradual and cautious approach to raising rates in which the Fed'south policymaking will be "data-dependent."

Yellen also is pursuing a campaign, begun below her two predecessors, to create the Fed more transparent. Greenspan started the effort in one thousand nine hundred ninety-fourth, when the Fed for the first time announced its decision to modify its benchmark rate. Bernanke expanded the policy statements, doubled to four times a year the no of updates the Fed made to its economic forecasts and added a chairman'south news conference after four of the Fed'south eight meetings each year to clarify its intentions.

Yellen has adopted all of Bernanke'south actions. And she's signaled that she wants to go further, in portion to reply critics who grumble that the Fed remains too secretive and unaccountable to Congress.

And how'll Yellen be judged?

"I think it'south too early to really judge her based on what she's done so far," said Sung Won Sohn, an economics Prof at CA State University, Channel Islands. "Yellen is an outstanding economist, but the role of Fed chairman has evolved so she'll also necessity to be a savvy politician and a diplomat."

Donald Kohn, a Fed staff economist who rose to become vice chairman during a long career at the Fed, said that while the four leaders displayed differences in operating style, they shared some key traits.

"They are all really bright people, and they all have a sense of history about the Fed as an institution," Kohn said. "There was never any question in my mind that each of them saw what they were doing as trying to further the public interest by achieving the Fed'south mandates on jobs and inflation."

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