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Bernanke Student Borrows Page From Fischer Writing for Fed

William English will take over next month as Fed Chairman Ben S. Bernanke's top adviser. Photographer: Andrew Harrer/Bloomberg
William English will take over next month as Fed Chairman Ben S. Bernanke's top adviser. Photographer: Andrew Harrer/Bloomberg

William English took up fencing as a sophomore at Yale University in 1980, practicing a sport that has been likened to “physical chess” for its strategy and precision.

Those skills will come in handy when he takes over next month as Federal Reserve Chairman Ben S. Bernanke’s top adviser on monetary policy, a job that puts him in charge of crafting the statements the central bank will use to signal a withdrawal of the most expansive monetary policy in its 96-year history.

The task is “about as challenging as any director of that post has ever had,” said former Fed Governor Lyle Gramley, now senior economic adviser at Potomac Research Group in Washington. “Markets have become extremely sensitive to every word the Fed puts out, so a slight mishap and he could send markets for a reel.”

English takes over as central bankers debate when to start raising interest their benchmark interest rate from close to zero. They must also decide on the pace and timing of sales of $1.1 trillion of housing debt the Fed bought up in the course of fighting the financial crisis.

“These are economic issues that academics are going to be thinking about for generations,” English said in an interview last month at the Fed’s Depression-era Washington headquarters. “I’m sitting in the middle of it, trying to make sense of it in real time.”

One of the first steps for policy makers will be to alter the Fed’s pledge to keep its main rate low for “an extended period,” said John Ryding, a former Fed researcher who’s now chief economist at RDQ Economics LLC in New York. In March, Kansas City Fed President Thomas Hoenig, who’s dissented from the panel’s language this year, proposed saying the rate “would be low for some time.”

‘Considerable Period’

Central bankers faced a similar choice in 2003 and 2004, when they cut the federal funds rate to 1 percent and said low borrowing costs were warranted for a “considerable period.” The Fed surprised investors by removing the language in January 2004, sending Treasury and stock prices lower, while the dollar strengthened against the euro and yen.

As monetary affairs director, English will oversee about 87 staffers and be responsible for compiling the confidential Bluebook, which outlines policy choices for Fed governors and regional presidents five days before meetings of the rate-setting Federal Open Market Committee.

The 49-year-old English, whose 6-foot, 10-inch (2.08-meter) frame has earned him the nickname “Big Bill,” is no stranger to his duties. Since 2008 he has helped draft the statements issued by the FOMC as a deputy director of the Monetary Affairs division under Brian Madigan, who is retiring.

Drafting Options

English has also worked with Madigan to draft options for policy makers during the financial crisis while collaborating with officials at the Treasury Department and Federal Deposit Insurance Corp. on emergency aid to banks including Citigroup Inc.

English “strikes me as a pretty natural successor to Brian Madigan,” said New York University Professor Mark Gertler, who’s collaborated on research with Bernanke. “I don’t think there’s any reason to think there will be a radical shift in policy.”

Allan Meltzer, a historian of the Fed, has said its involvement in bailouts and emergency lending programs during the crisis has compromised its independence. He faulted the Monetary Affairs staff for being “far too supportive” of actions by Bernanke and other policy makers.

“It’s a difficult job in the best of times,” Meltzer, a professor at Carnegie Mellon University in Pittsburgh, said of English’s new post. “And these are not the best of times.”

Mahogany Table

English will work with Bernanke before meetings to craft possible decisions and statements. He will then face Bernanke across a 27-foot mahogany-and-granite table, with Fed governors and presidents arrayed on either side. Officials can modify the proposed language of the policy statement before voting on it and releasing it to the public.

At the last Fed meeting April 27-28, the FOMC voted 9-1 to leave the target for overnight lending among banks close to zero and retain the “extended period” pledge. The FOMC next meets June 22-23 in Washington. Economists surveyed by Bloomberg News this month expect the Fed to start raising its main rate in the first quarter of 2011, based on the median estimate.

The Monetary Affairs division is also responsible for producing minutes of FOMC meetings, the discount lending window for banks and a quarterly survey of senior loan officers at banks. The Fed holds regular meetings eight times a year.

Dinner Table Conversation

The youngest of four children, English grew up in West Hartford, Connecticut. His interest in finance was spurred by dinner-table conversation with his father, James, who was chief executive officer of Connecticut Bank & Trust Co. in the 1970s and served on the Federal Advisory Council, a group of bank executives that advises the Fed.

At Yale in New Haven, Connecticut, English wandered into a gym where the fencing team was practicing and was recruited on the spot because of this height. He earned a bachelor’s degree in economics and mathematics in 1982 and entered graduate school at the Massachusetts Institute of Technology.

Among his teachers at MIT in Cambridge was Bernanke, then a 29-year-old visiting professor from Stanford University. His thesis adviser was Stanley Fischer, who now heads Israel’s central bank and who advised Bernanke on his dissertation at MIT in the 1970s. Mervyn King, now Bank of England governor, was also a visiting professor at MIT while English was there.

English taught economics at the University of Pennsylvania for six years before joining the Fed in Washington as a banking economist in 1992. He helped Donald Kohn, the Fed’s monetary-affairs director from 1987 to 2001, analyze bank-capital rules. Kohn is retiring this month as Fed vice chairman.

“Bill had an enormous capacity for detail and getting into the weeds and understanding the balance sheets of financial institutions,” said Vincent Reinhart, the Fed’s monetary-affairs director from 2001 to 2007 who is now a resident scholar at the American Enterprise Institute in Washington.

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