In a voice vote Aug. 5, the Senate confirmed the appointment of Ben Bernanke, former University economics department chair, to the Federal Reserve System's Board of Governors. Bernanke's appointment concludes a process that began with his nomination by President Bush this May.
As a member of the Federal Reserve Board, Bernanke will sit on the Federal Open Market Committee, which sets interest rates and holds considerable influence over the U.S. economy. President Bush has now appointed five of the seven members of the Board of Governors.
Bernanke will serve out the last two years of a 14-year term first held by Edward Kelley Jr., who resigned last December. When his term ends on Jan. 31, 2004, Bernanke has said he will either return to the University or seek reappointment to the Fed.
Speculation has already begun, however, that Bernanke is a prime candidate to replace Alan Greenspan at the helm of the Fed. A February survey of economic forecasters named Bernanke a possible successor to the aging chairman, who will be 78 when his term expires in 2004.
Economists have applauded Bernanke's appointment, saying that he and fellow appointee Donald Kohn would add expertise in monetary policy and provide continuity when Greenspan retires.
In confirmation hearings before the Senate banking committee, chaired by Sen. Paul Sarbanes '54, Bernanke and Kohn both said they would push for greater openness and public understanding of the Fed's workings.
Bernanke is known for his advocacy of inflation targeting, in which the Fed explicitly sets an annual inflation goal.
Current chairman Greenspan has avoided taking such an approach, arguing that it is too inflexible. Despite their differences on inflation, however, Bernanke has said he generally agrees with Greenspan's monetary policy.
Bernanke joins a select circle of Princetonians who have served on the Fed's Board of Governors, which includes former chairman Paul Volcker '49 and former vice chairman Alan Blinder '67, who is a current economics professor at the University.
The Federal Reserve Board was founded by Congress in 1913 to conduct the nation's monetary policy, supervise and regulate banking institution and, maintain the stability of the financial system.
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