Covering Bernanke at Congress

Federal Reserve Board Chairman Ben Bernanke appeared before a Congressional hearing on Wednesday and the headlines he made were decidedly different across the various national media covering his remarks.

First, the Wall Street Journal story, which ran with the headline “Bernanke: Bond Buys Could Slow at ‘Next Few Meetings’” and focused on the Fed’s ending of economic stimulus:

Federal Reserve Chairman Ben Bernanke said the central bank could begin winding down its $85 billion-a-month bond-buying program at one of its “next few meetings” if the economic data continues to improve, but he warned market participants that a step down in purchases won’t mean the Fed has started a one-way march toward the exit.

“We are trying to make an assessment of whether or not we have seen real and sustainable progress in the labor-market outlook,” Mr. Bernanke said during a congressional hearing Wednesday, when pressed about when the Fed intends to end its easy-money policies.

If Fed officials see continued economic improvement and have confidence that it is going to be sustained “in the next few meetings we could take a step down” in pace of purchases, he said. At the same time, Mr. Bernanke said the Fed wants to be careful not to move prematurely on the policy shift.

When the Fed does take that step, Mr. Bernanke said it won’t mean we are “automatically aiming for a complete wind-down,” Mr. Bernanke said. “Rather we would be looking beyond that to seeing how the economy evolves and we could either raise or lower our pace of purchases going forward. Again that is dependent on the data,” he said.

Overall, Mr. Bernanke’s comments on winding down the bond-buying program indicate the Fed has a plan, but remains undecided about when to pull the trigger. When pressed further on timing, Mr. Bernanke declined to say whether the Fed would make this move by Labor Day.

The New York Times took nearly the opposite approach with a story running under the headline “Fed Stimulus Still Needed to Help Recovery, Bernanke Says”:

Despite recent improvement in the job market, the Federal Reserve needs to continue its stimulus efforts to avoid endangering the recovery, the Fed chairman, Ben S. Bernanke, told Congress on Wednesday.

While acknowledging the risks of historically low interest rates and the Fed’s aggressive policy of buying government bonds to help stimulate the economy, Mr. Bernanke said in testimony that “a premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery.”

After his opening statement, however, Mr. Bernanke seemingly opened the door a bit wider to tapering down.

Under questioning by Representative Kevin Brady, a Texas Republican who chairs the Joint Economic Committee, Mr. Bernanke said the Fed could prepare to “take a step down” in the next few meetings if the outlook for the labor market improved.

“It’s dependent on the data,” he said. “If the outlook for the labor market improves, we would respond to that.”

The Washington Post took a much more political angle on the story, pointing out to Congress for the failures in the economy:

Ben Bernanke testifies before Congress today for the first time in three months, and the Federal Reserve chairman has a message for lawmakers: You’re the reason the economy isn’t taking off more.

Of course, Bernanke is too polite to phrase things quite so bluntly. But to anyone versed in Fedspeak, that’s the gist of his message. Even as state and local governments are becoming less of a drag on growth, Bernanke says in his prepared testimony before the Joint Economic Committee, “fiscal policy at the federal level has become significantly more restrictive.”

“In particular,” his testimony says, “the expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year.”

He adds that with the Fed’s interest rate policies already near zero, “monetary policy does not have the capacity to fully offset an economic headwind of this magnitude.”

It might be one thing if the fiscal retrenchment was also solving the country’s longer-term deficits. But, Bernanke says, it has not. “Although near-term fiscal restraint has increased, much less has been done to address the federal government’s longer-term fiscal imbalances,” he says in the prepared testimony. “Indeed, the [Congressional Budget Office] projects that, under current policies, the federal deficit and debt as a percentage of GDP will begin rising again in the latter part of this decade and move sharply upward thereafter.”

That’s three different leads from the nation’s leading newspapers, which makes it a bit confusing to determine the real message behind the Fed chairman’s remarks. Typically large news organizations tend to focus on similar leads and language, especially in covering remarks that are provided before. In this case, your guess to his meaning is as good as any.