From Roger Lowenstein’s NY Times profile of Bernanke:
bq. After briefings from the staff, the members [of the Fed’s Open Market Committee] go around the table as if it were a Princeton seminar, each expounding on his or her view of the economy (transcripts of Bernanke meetings are running much longer than those under Greenspan). The bank presidents give an idea of conditions around the country, and the governors tend to coalesce around Bernanke’s view. In Greenspan’s era, the chairman led off by giving a lengthy disquisition of his outlook and policy recommendations. Every member had a chance to speak after him, but the pressure to agree with the maestro was daunting. In a profound switch, Bernanke now presents his views last.
This is indeed a profound switch. Everything that we know about group decision-making — in particular, from Irving Janis’ Groupthink — suggests that Greenspan’s model is much more likely to produce a quicker consensus (hence the shorter meetings), but not necessarily the correct consensus. Regarding his most famous case study, the Bay of Pigs invasion, Janis discusses the “docility fostered by suave leadership,” in this case Kennedy’s. It may be a stretch to call Greenspan “suave,” but it’s clear, as Roger Lowenstein suggests, that his view held sway.
While groupthink dynamics could still be at work in the Bernanke era, there are encouraging signs of healthy deliberation. Lowenstein notes that committee members have been “much freer to speak their minds” and that occasionally members have voted against Bernanke’s plans. Lowenstein refers to this as “embarrassing” and as creating “confusing” “dissonance” for Wall Street.
But I am encouraged, especially in light of many views, including Lowenstein’s, that Greenspan simply failed to grasp how Fed policy was helping to foster dubious mortgage lending. Lessening tendencies toward groupthink will not necessarily eliminate such mistakes, but it makes them less likely.