If there were a national election next year for Federal Reserve chairman as well as for president of the United States, Eric Rosengren might be the dark-horse candidate to become America's next banker-in-chief, a position currently held by Ben Bernanke. Who is Eric Rosengren? He's the president of the Federal Reserve Bank of Boston—he's been in the job only since July—and the lone member of the Fed's policymaking committee to vote for a half-percentage-point cut in the federal funds rate at this week's meeting.
At the very least, Rosengren would seem a lock to win the all-important Wall Street primary. The Dow Jones industrial average plunged nearly 300 points after the rest of the 10-member Federal Open Market Committee, including Bernanke, voted to chop just a quarter point from the key short-term interest rate, lowering it to 4.25 percent. Moreover, the FOMC lowered the discount rate—what the Fed charges banks to borrow—by a less-than-expected quarter point and put out a statement that still seemed to be as much about inflation as about economic growth and troubles in the corporate credit markets.
"Wimps who voted for mush" is how economist Robert Brusca of Fact and Opinion Economics describes the national central bankers. "The Fed is trying to help, but its clumsiness is undermining confidence rather than enhancing it," opines economist David Gitlitz of TrendMacrolytics. And it's not just that some analysts think the Fed should be cutting further and faster or not at all because of inflation pressures. It's that all the efforts by the Fed to be more open and transparent have left Wall Street completely flummoxed. More so than under Alan Greenspan, Fed members feel free to speak opinions more clearly opposed to the chairman's.
"The Fed needs to speak more with a single voice," says economist Donald Rissmiller of Strategas Research. Bernanke also appears more willing to seek a consensus contrary to his own take on the economy and Fed policy, which is why so many investors were surprised by the hawkish Fed tone. Instead of asserting himself as the chairman, some complain, Bernanke acts more as if he's just one of the 10 FOMC members. "We definitely need a stronger hand from Bernanke," says Kim Rupert, head of the fixed-income shop at Action Economics. "We're being whipsawed." And releasing the joint-action plan with other central banks the day after the market plunge didn't add to investor confidence. Well, Bernanke's got the job until January of 2010. The next few months may decide whether he has it in February 2010.