Harris: Get to Know Bernanke's Fed

This column was written by Ethan Harris, co-chief U.S. economist for Barclays Capital (BCS Quote) and author of the new book Ben Bernanke's Fed: The Federal Reserve After Greenspan.

It is often said that the Fed chairmanship is the second most important job in America. And yet, while there are many books about Alan Greenspan, there have been no books written about Ben Bernanke -- until now.

Contrary to popular belief, Bernanke is not Greenspan with a beard. Indeed one of the big mistakes investors have made in the last two years is to view Bernanke through Greenspan glasses. Bernanke's policies are shaped by a very different background than his more famous predecessor.

Consider the most important questions of the day: How should the Fed behave if it suspects an asset bubble, and what should it do if that bubble bursts? While there is intense soul-searching going on, the consensus at the Fed is that central banks should take an "asymmetric risk management approach" to suspected bubbles. That is, it should not react to bubbles as they develop, but should react strongly when they pop to avoid serious collateral damage to the economy. ...