VOL. 123 | NO. 33 | Monday, February 18, 2008
Amid Economic Turmoil, Fed Chief Consulted With Major Players in Financial World
By JEANNINE AVERSA | AP Economics Writer
WASHINGTON (AP) - Federal Reserve Chairman Ben Bernanke consulted with predecessor Alan Greenspan, major financial players and even a speech consultant as he grappled with growing economic turmoil.
Bernanke met with Greenspan, who ran the Fed for 18 1/2 years, on Jan. 2. That was eight days before Bernanke delivered a major speech that was unusually direct and made clear the Fed was prepared to aggressively lower interest rates to bolster an ailing economy.
Three months earlier - on Oct. 2 - Bernanke had a two-hour meeting with communications expert Andrew Gilman, president of CommCore Consulting Group.
Gilman worked with Bernanke on speech delivery, according to both Gilman and Fed spokeswoman Michelle Smith. Gilman's bio says he has worked as a communications strategist and a crisis counselor. Gilman's session with Bernanke, however, did not involve crisis management, Smith and Gilman said.
The information on the meetings was contained in documents obtained under the Freedom of Information Act by Ken Thomas, a lecturer in finance at the University of Pennsylvania's Wharton School. Thomas provided the documents to The Associated Press.
The documents cover the time frame of September through January — a particularly turbulent period as the double-blows of a housing and credit crisis strained the economy, rocked Wall Street and fanned recession fears.
The information simply lists Bernanke's contacts through the day. It does not provide information about the content of meetings or telephone calls. But it does provide a rare glimpse into one of Washington's most mysterious institutions.
The housing and credit debacles are Bernanke's biggest challenges in his two years as Fed chairman. Those problems threaten to push the economy into its first recession since 2001, if they haven't already. How well Bernanke, a former economics professor and scholar of the Great Depression, handles these crises will shape his effectiveness, his credibility and his legacy at the central bank.
In early September - before the Fed starting cutting interest rates - Bernanke had separate meetings with people including Goldman Sachs Group Inc.'s chief executive, Lloyd Blankfein, former Treasury Secretary Larry Summers and Wachovia Corp. chief executive Ken Thompson. On Sept. 18, the Fed lowered interest rates for the first time in more than four years. The rate reduction came after the housing slump worsened and the credit markets took a turn for the worst, throwing Wall Street into turmoil.
The documents show that throughout the September to January period, Bernanke talked frequently to Treasury Secretary Henry Paulson, former chief of financial powerhouse Goldman Sachs. Bernanke also talked with his central bank counterparts in other countries, an array of economists, lawmakers, including House Majority Leader Steny Hoyer, D-Md. , and corporate chiefs, including Ford Motor Co. chief executive Alan Mullaly.
The Fed sliced interest rates again in October and once more in December — but Bernanke came under increasing criticism on Wall Street and elsewhere for not acting more aggressively to deal with the economy's problems. During that period, Bernanke met with major financial players, including Morgan Stanley's Robert Scully, JPMorgan chief executive Jamie Dimon and Robert Wolf, head of UBS Investment Bank.
A turning point of sorts came on Jan. 10 — when Bernanke signaled in his speech a more forceful stance. The Fed slashed rates by a rare three-quarters percentage point on Jan. 22, after Bernanke convened an emergency session following a nosedive in stocks worldwide. The Fed acted again — just eight days later — lowering rates by a half percentage point.
And, on Thursday, Bernanke signaled rates would likely move lower to combat the growing dangers to the economy.
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