Transcripts

Commentary: The Struggle of Being the Fed Head

SUSIE GHARIB: Tonight's commentator says it's not easy being Ben, Ben Bernanke that is. She's Alice Rivlin, former vice chair of the Federal Reserve and senior fellow at the Brookings Institution.

ALICE RIVLIN, SENIOR FELLOW, THE BROOKINGS INST.: If you think being chairman of the Fed is a nifty job, think again. It comes with vociferous advice from all sides. Wall Street wants lower interest rates, as usual. But now, they are joined by worried economists urging the Fed to prevent the disaster they see looming ahead. The worriers fear that declining housing equity will slash consumer spending. They see defaults in the sub- prime market rising as adjustable rates reset and the fallout affecting prices across vast neighborhoods. Big investors in mortgage backed bonds are in trouble and scary defaults cannot be ruled out. The pessimists are urging the Fed to buy disaster insurance by lowering rates.

But the economy, buoyed by exports is still growing and unemployment is low. With oil prices in the stratosphere and winter approaching, inflation could spike. Cutting rates can only make a weak dollar weaker, contributing to inflation and angering our trading partners. Moreover, lower rates would reward investors who made bad decisions and set the stage for a bubble in the next asset class that catches the fancy of the moneyed herd. Sitting tight is the prudent thing for the Fed to do, but inaction will not generate affection for the chairman. And just imagine the vituperation if the pessimists turn out to be right. I'm Alice Rivlin.