MELISSA BLOCK, Host:
The global meltdown of financial markets thrust Federal Reserve chairman Ben Bernanke into the spotlight this week. He responded with a large and surprising rate cut. Bernanke took over from the legendary Alan Greenspan two years ago, but he's still a bit of a mystery on Main Street and Wall Street.
NPR's John Ydstie reports on the Fed chairman and his approach to the job.
JOHN YDSTIE: Ben Bernanke came to Washington with the intention of dissolving the cult of personality created around recent Fed chairman, including Alan Greenspan. Vincent Reinhart worked closely with both men before retiring this fall from his job as secretary of the Fed's policymaking Open Market Committee. He says Bernanke, a former career economics professor at Princeton, wants to make the Fed's decisions about the economy a group effort, not a one-man affair.
BLOCK: His goal is to have the committee be more actively involved in the deliberation of U.S. monetary policy. He doesn't want to be the iconic figure that Alan Greenspan was. That really is an unselfish act in Washington. That doesn't happen very often.
YDSTIE: And up until this week, Bernanke had largely succeeded in blending into the crowd of Fed governors and regional bank presidents who make up the Fed's Open Market Committee. In fact, just this past Thursday, even a 20-year veteran of the Congress, Marcy Kaptur, an Ohio Democrat, was confused about exactly who he was.
(SOUNDBITE OF CONGRESSIONAL HEARING)
R: Seeing as how you were the former CEO of Goldman Sachs, what percentage level of investment, were you not...
BLOCK: No, no, no. No. You're confusing me with the Treasury Secretary.
R: I've got the wrong firm?
BLOCK: Yeah.
R: Paulson. Oh. Okay. Where were you, sir?
BLOCK: I was a CEO of the Princeton Economics Department.
(SOUNDBITE OF LAUGHTER)
R: Oh. Princeton. Oh, all right. Sorry. Sorry, I got you confused with the other one. I'm sorry.
YDSTIE: As chairman of the Princeton Economics Department, Bernanke presided over departmental meetings. They were often free-wheeling discussions, say colleagues, with sharp exchanges of opinion among very smart people. That experience probably contributed to Bernanke's decision to make the development of monetary policy, a committee affair, says Vincent Reinhart.
BLOCK: It has some good parts to it and the bad parts to it. The good parts are basically - believe in the wisdom of crowds. More people deliberating on policy, maybe on average, will make a better a decision.
YDSTIE: The bad part is that during a fast-moving crisis, you can't always get a crowd headed in the same direction. And you can get different voices giving different signals. That's what happened this summer and fall when multiple Fed governors publicly voiced their views on what direction the Fed ought to take as the subprime crisis unfolded. It drove Wall Street traders a little crazy, including the host of CNBC's Mad Money, Jim Cramer.
(SOUNDBITE OF SHOW "MAD MONEY")
BLOCK: Bernanke is being an academic. It is no time to be an academic. It is time to get on the Bear Stearns call. Listen. Open the darn Fed window. He has no idea how bad it is out there. He has no idea.
YDSTIE: Wall Street veteran and longtime Fed watcher, David Jones, of DMJ Advisors, is a bit calmer in his analysis.
BLOCK: The Fed was giving mixed signals and seemed to be reluctant as to how much it was really going to cut rates. I think, in part, that's because Fed Chairman Bernanke has a lot of book smarts. He came from the academic side, but really didn't have the kind of street smarts that Chairman Greenspan, his predecessor had.
YDSTIE: Vincent Reinhart acknowledges Bernanke doesn't have the market experience Greenspan had, but argues other members of the Open Market Committee do. And he points out Bernanke is the leading academic expert on central banking in the world. He says, Wall Street will have to adjust.
BLOCK: For markets, they have to understand that there's no single father figure; that monetary policy is a process made by a group of individuals, and they're going to have to listen to more voices.
YDSTIE: But Reinhart says, Bernanke has to learn that during a crisis, the chairman must take control. Bernanke's former colleague at Princeton and former Fed governor himself, Alan Blinder agrees.
BLOCK: Taking the bull by the horns and exercising the levers of power, the country does need now on the economic front. And I think the Fed didn't seem to be quite doing it after a while but now it does seem to be doing it, and led by Bernanke, for sure.
YDSTIE: Wall Street also seems happier. That's helped by the fact that since the surprise Fed rate cut on Tuesday, U.S. market indexes and global indexes have recovered.
John Ydstie, NPR News, Washington.