Ben Bernanke, Federal Reserve chief

The professor who can save America from depression. He made his name on the campus; now Federal Reserve chief Ben Bernanke must pluck his country from the economic abyss.

Ben Bernanke, the Federal Reserve chairman, is like a man who, after spending a lifetime playing with train sets, finally gets to drive the real thing - only to find it hurtling towards the edge of a cliff. Having honed his reputation in Ivy League classrooms, analysing the links between central banks and the real world, Bernanke now has the challenge of guiding the US economy through its most serious crisis for many years.

On September 18, under extraordinary scrutiny, Bernanke and his colleagues on the Fed's decision-making board will hold their regular meeting to set interest rates. Investors on Wall Street and around the world, and politicians in Washington, are pinning their hopes on the 53-year-old former Princeton professor preventing the world's biggest economy from heading into recession.

"One of Bernanke's main claims to academic fame is his study of the Great Depression, and how the failure to respond to the collapse of financial institutions turned a market crash into a bad economic problem," says Andrew Scott, of London Business School. "From that point of view, he's a fantastic person to have in charge."

In Bernanke's analysis, the Fed was to blame for the Depression, for failing to realise the enormousness of the situation facing it. He won't want today's Fed to make that mistake - and is almost certain to heed Wall Street's squeals this week by cutting rates, perhaps by as much as half a percentage point. But, with many of the respected blue chip financial institutions lumbered with billions of dollars of toxic mortgage debts, bundled up in illiquid and fearsomely complex packages, the fallout from the credit crunch will be felt for many months, whatever Bernanke's response.

Hank Paulson, the US Treasury Secretary, has warned that the current turmoil will take longer to resolve than the market pain that followed the Russian debt default in the late 1990s, or the Latin American credit crisis in the 1980s.

Bernanke was appointed last year, after less than a year as chairman of George Bush's Council of Economic Advisers, which many observers had seen as probation for the Fed job. During his time at the White House he made few headlines - although the President was apparently much amused by his donnish penchant for wearing pale socks with dark suits.

Few observers could quibble with his impeccable academic CV, but there was some disquiet, on Wall Street at least, about his inflation-fighting credentials. He had been nicknamed 'helicopter Ben' after a speech in 2002 when he warned that the Fed should be alert to the risk of deflation, reminding his audience of Milton Friedman's proposal of a 'helicopter drop' of free cash, to keep prices from falling. This led some Fed-watchers to fret he was an interest-rate dove, more worried about deflation than inflation.

The other doubt expressed by investors was that as an academic, not a money man, he didn't possess the sure touch of his revered predecessor Alan Greenspan with either Wall Street or the White House.

(from Observer News Service By Heather Stewart)