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Bernanke among "smartest guys on the planet"

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Ben Bernanke, who stepped down last week after eight momentous years as chairman of the Federal Reserve, is joining the Brookings Institution, a Washington think tank.

Bernanke will be a distinguished fellow in residence affiliated with Brookings’ Hutchins Center on Fiscal and Monetary Policy, according to Brookings President Strobe Talbott.

Janet Yellen on Monday was sworn in to succeed Bernanke at the Fed.

Bernanke had not previously disclosed his plans but had said he intended to stay in Washington and looked forward to writing and giving speeches on economic policy. Before coming to Washington, he had taught at Princeton University.

Talbot said Bernanke would be a “major contributor to the task of understanding the momentous events of the past eight years”.

Bernanke, appointed by Republican President George W. Bush as Fed chairman in 2006, gaveled his final policy-setting meeting last week, at which the central bank continued its winding down of the controversial and massive bond-buying program that was Bernanke’s signature strategy to jump-start the tepid recovery.

The former Princeton professor is expected to write a book and has brought along one of his top Fed press deputies, David Skidmore, to help with editing and research.

“I will still pay close attention to what he says and writes, not because I think he’ll have some inside edge on what will happen next with Fed policy, but because he is still one of the smartest guys on the planet when it comes to central banking and monetary theory,” said Michael Feroli, JP Morgan’s chief economist.

Bernanke bought trillions of dollars of bonds and promised to keep interest rates near zero well into the future as he fought to respond to the 2007-2009 financial crisis and recession, which infected the rest of the developed world and saw the U.S. unemployment rate climb to 10 percent in 2009.

“Given that he was an integral part of the policy decision making over the past five years … over the next year he will have some value to the market but less so than Yellen, and it will diminish over time,” said Millan Mulraine, a researcher at TD Securities in New York.

“I suspect he will probably keep a fairly low profile – he doesn’t want to complicate the process for the new chair.”

While Bernanke’s legacy will hinge heavily on whether the Fed’s massive balance sheet, at $4 trillion and counting, sparks inflation or market disruptions in the future, for now he is being praised as the soft-spoken chairman whose unprecedented policy actions helped avert economic calamity.

His decision to move to a think tank contrasts with the job history of his predecessors.

Alan Greenspan, whose tenure at the Fed is now clouded as having sown the seeds of the crisis, has been criticized for cashing in on his experience by consulting for Wall Street. The former chairman founded his own consulting firm shortly after stepping down on January 31, 2006, and a year and a half later was lending his expertise to Deutsche Bank.

Seven months after former chair Paul Volcker stepped down in 1987, he became part-owner and chairman of a small New York investment banking firm, Wolfensohn & Co. Volcker also took a professorship post at Princeton University, where he had gone to college.

-with Reuters

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