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Slate's Moneybox: Finances of the Future Fed Chief

NOAH ADAMS, host:

And now to President Bush's nominee to replace Alan Greenspan as the chairman of the Federal Reserve, Ben Bernanke. He is an Ivy League-trained academic. He has chaired the President's Council of Economic Advisers since back in June. He's a former member of the Federal Reserve's Board of Governors.

But what about Mr. Bernanke's own financial situation? Henry Blodget writes for the online magazine Slate, and he's done a bit of research.

Henry, welcome back to DAY TO DAY.

HENRY BLODGET (Slate): Thank you for having me.

ADAMS: What is Mr. Bernanke worth?

BLODGET: Well, he is wealthy. He's not dynastically wealthy, but he--with his retirement account, his family's savings, he has between about a million and 5 million, which actually puts him in the lower half of the former Fed governors. Alan Greenspan, for example, has between 4 and 9 million.

ADAMS: So where does he have most of his money?

BLODGET: Most of it's in his retirement account. We don't actually know how that's invested, but interestingly, in his main account that we can see, most of his holdings are in mutual funds, and most of them are actively managed mutual funds, where people are trying to pick stocks and so forth. And that's very interesting, given his history as an academic, because most academics think the market is efficient and that stock-picking doesn't work and so forth. But--so most of it's in mutual funds. He does have one stock, which is Altria, the old Philip Morris. Must be a story about why that's there, but it's certainly interesting. And then some cash and so forth. So relatively conservatively invested.

ADAMS: Is there any indication of what he does with this money, the control of his assets, if he's confirmed as the new chairman?

BLODGET: Certainly no indication from what he's done. If one judges from Alan Greenspan and assumes that Bernanke is going to try to follow Greenspan, which would certainly be a good thing to do, Greenspan has most of his money in just the safest and least controversial asset imaginable, which is short-term Treasury bills. And he can't be accused of any conflicts of interest. He obviously is forced to deal with his own inflation that he imposes on the system, because his money is in cash and so forth. So that would certainly seem to be a safe way to invest the money going forward.

ADAMS: Now from the work you've done, looking at the record here and his choices, do they suggest anything about what sort of monetary policy he might support for the greater good of the country?

BLODGET: Explicitly, of course not. We're reading the tea leaves. I think if you read the tea leaves, there are some interesting implications, and as I alluded to earlier, most of his mutual funds are actively managed funds, and these are where portfolio managers try to beat the market. What's interesting about that is that he is an academic. Most academics believe in efficient market theory. They think you should just index everything, keep it low-cost.

So what can we take from that? Well, I would say there are a few different interpretations, first, that Bernanke doesn't know the data, which seems highly unlikely, given his background. Secondly, he has the academic and brainpower talent to know the truth on the indexing side, but can't quite put it into practice and has trouble making decisions, so that's unlikely, too, I think. Third, he might be overconfident about his own ability to do better than the market. Certainly, he seems very excited about the process for America and so forth. But I would say the most likely is that he probably just doesn't care and he has a good stockbroker at Merrill Lynch, where he seems to be, and is willing to sacrifice the one or two percentage points a year in sort of a don't worry, be happy; it'll all work out in the end.

And if there is any implication from that, I think it certainly supports the idea that he might be a little bit looser on inflation than some would like, which means that he would certainly vote for the economic prosperity and a strong economy rather than being an incredible hawk on controlling inflation.

ADAMS: Slate's Henry Blodget talking with us from New York.

Thank you, sir.

BLODGET: Thank you for having me.

ADAMS: Stay with us on DAY TO DAY from NPR News. Transcript provided by NPR, Copyright NPR.

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