"We stand ready to take substantive additional action as needed to support growth and to provide additional insurance against downside risks." Federal Reserve Chairman Ben Bernanke said those words on January 10, about 1,000 Dow points ago. Today, the Fed finally took action by cutting short-term interest rates by three quarters of a percentage point. It should help tamp down the panic and start to put a floor under the stock market.
See, what's been going on in the markets has been a crisis of confidence, and Bernanke seemed to be instilling little of that precious commodity. And this weekend's profile of him in the New York Times magazine didn't do much to create any, I would guess. Two troubling passages:
Bernanke...was now confronting the specter of a financial implosion of the sort he had so often written about. Although he knew the experience of the 1930s in his sleep, he was, in truth, unfamiliar with the exotic mortgage instruments that were failing now.
Bernanke has a serious manner, befitting a scholar who once expected to spend his entire career in academia. He is shy and seemed faintly ill at ease, stiffly folding his arms while we talked; his hand trembled slightly when he gave me one of his books. He answered questions with an absence of emotion but with a torrent of carefully worded fact.
The article reinforces a perception of Bernanke as a cloistered academic, removed from today's real-world, high-velocity financial markets and thus unable to grasp the full implications of the global credit market meltdown. Today's move should help reassure investors about Bernanke.