{Constructive ambiguity} is a phrase that's been used often in central banking circles. And I think it's most often associated with the idea that you should hold back communicating what circumstances under which you're willing to lend or intervene, and allow market participants to be uncertain about what those circumstances are. I think that the objective of, the argument I've heard for constructive ambiguity amounts to having two things at once. Having the discretion to intervene, but trying to convince markets that you won't.
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If you intervene, it's going to involve some moral hazard. Moral hazard's going to be the greater the greater the probability people expect you to intervene. So you'd like to minimize moral hazard. So you'd like them to think you're not going to intervene. At the same time, when the time comes, and some crisis emerges, you would like to have the discretion to intervene. So I think of constructive ambiguity as an attempt to have it both ways, to try and get people to behave as if you're not going to intervene, but to retain the discretion to intervene.

{In reference to separating the Fed from other institutions by adding responsibilities} I think it's likely to emerge as a theme. I think it ought to be front and center in the discussion about financial regulatory reform and restructuring if Congress would like to go down that path, restructuring regulatory responsibilities at the federal level. Our paramount responsibility is keeping prices stable, inflation low and steady. There are other responsibilities we have accumulated over the years. And we have, as a result of our history, where we came from, and various responsibilities that have been given to us. But our ability to exercise independent judgment about the level of the policy rate, I think, is quite important. And I do see some merit to the argument that adding responsibilities can threaten to dilute the independence that we need for that responsibility.

I want to identify some issues that are critical to our current responsibilities and will be important in defining an appropriate role in the future, with the most effective mix of responsibility and authority.
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First, the Fed has a very important role today, working in cooperation with bank supervisors and the SEC, in establishing the capital and other prudential safeguards that are applied on a consolidated basis to the institutions that are critical to the proper functioning of financial markets.
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Second, the Fed, as the financial system’s lender of last resort, should play an important role in the consolidated supervision of those institutions that have access to central bank liquidity and play a critical role in market functioning.
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Third, the Federal Reserve should be granted explicit responsibility and clear authority over systemically important payment and settlement systems, and the ability to continue to encourage broader improvements in the over-the-counter derivatives markets.
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Fourth, the Federal Reserve Board should have an important consultative role in judgments about official intervention where there is potential for systemic risk, as is currently the case for bank resolutions under FDICIA.
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And, finally, the responsibilities for market and financial stability that are accorded the Fed in current and any future legislation will require that the Fed adopt a more comprehensive approach to financial supervision and market oversight.
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These initiatives will take time, but we expect to see substantial progress over the next two quarters.

I just want to note, though, that to the extent that we improve the social safety net in this country, which is important on its own, I think we also give more flexibility to monetary policy, because the Federal Reserve would then be freer in times when it felt it was necessary for other reasons to slow down the economy in the knowledge that this would not have, as it has today, a disproportionately negative effect on a lot of people who are more vulnerable economically.

"The Fed will want to be as low-key and invisible as possible and that means the Fed will not want to change the funds rate ahead of the election," said William Poole, who retired in March as president of the St. Louis Federal Reserve Bank after a decade on the Fed's rate-setting committee.

"But I believe that if there is a compelling case, the Fed will do so," he said. "I do not believe the Fed will abstain from necessary policy action because of the election."

I do believe, however, that lender-of-last resort policies should take a lesson from what we have learned from the theory of monetary policy. In particular, policy should have important rule-like features. Specifying in advance the conditions or states of the world under which the central bank will lend is an essential first step. But policy must also make credible commitments to act in a systematic way consistent with explicit ex-ante guidelines. Discretion in lending practices runs the risk of exacerbating moral hazard and encouraging financial institutions to take excessive amounts of risk. Nevertheless, the issue of trading off financial stability and moral hazard will likely remain. 

Beyond that, the central bank's historical role as a lender of last resort places it squarely in the center of financial disruptions as they unfold. We are perhaps not as close to a consensus on the proper conduct of this role as we are with regard to price stability. But as we continue to learn about the causes and nature of financial instability, I believe we should strive for policy that is informed by the lessons learned in the achievement of price stability. Chief among those is that a central bank can achieve better outcomes if it can establish credibility for a pattern of behavior consistent with achieving its long-term goals.

Another instrument of liquidity provision that central banks are examining is currency swaps to facilitate granting liquidity in other currencies. The central banks found currency swaps useful because the impediments to intermediation in money markets naturally extended to transactions across currencies as well as across maturities and counterparties. Supplying credit in dollars to banks in the euro area and Switzerland helped relieve pressure on those banks and in our markets. In recent months, the Fed was able to make currency swap arrangements on short notice but our reaction time could be even shorter if we keep such arrangements in place or on standby. Thinking carefully about which circumstances in the future would warrant the activation of such arrangements will be a useful form of contingency planning.

Ben has a charming sense of humor ... He is not only prodigiously smart, but I think that the best thing that happed to him is that he served on a school board in New Jersey ... It allows him to run a meeting with harmony and results.

From Q&A as reported by Market News International

Our deliberations are quite civil. I defy you to find any place in government that operates that efficiently ... I think perhaps it is the last deliberative body that is totally civil.  
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I don't ever feel restrained speaking as a Federal Reserve official. I don't have to clear my speeches ... I think that's unique.

From Q&A as reported by Market News International

You might wonder why a central banker would be concerned with fiscal matters. Fiscal policy is, after all, the responsibility of the Congress, not the Federal Reserve. Congress, and Congress alone, has the power to tax and spend. From this monetary policymaker’s point of view, though, deficits matter for what we do at the Fed. There are many reasons why. Economists have found that structural deficits raise long-run interest rates, complicating the Fed’s dual mandate to develop a monetary policy that promotes sustainable, noninflationary growth. The even more disturbing dark and dirty secret about deficits—especially when they careen out of control—is that they create political pressure on central bankers to adopt looser monetary policy down the road.
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Earlier I mentioned the Fed’s dual mandate to manage growth and inflation. In the long run, growth cannot be sustained if markets are undermined by inflation. Stable prices go hand in hand with achieving sustainable economic growth. I have said many, many times that inflation is a sinister beast that, if uncaged, devours savings, erodes consumers’ purchasing power, decimates returns on capital, undermines the reliability of financial accounting, distracts the attention of corporate management, undercuts employment growth and real wages, and debases the currency.

Purging rampant inflation and a debased currency requires administering a harsh medicine. We have been there, and we know the cure that was wrought by the FOMC under Paul VolckerEven the perception that the Fed is pursuing a cheap-money strategy to accommodate fiscal burdens, should it take root, is a paramount risk to the long-term welfare of the U.S. economy. The Federal Reserve will never let this happen. It is not an option. Ever. Period.

Right now, I think we are seeing challenges on both sides of that (dual mandate) and I think we are simply going to have to navigate the minefield...We have to take care that the policies we have pursued to date do not compromise the achievement of our dual mandate, and in particular, our objective of sustained low inflation.

As reported by Reuters.

Timothy F. Geithner, president of the Federal Reserve Bank of New York, and a close Bernanke ally, defines the Fed chief’s “doctrine” as the overpowering use of monetary policies and lending to avert an economic collapse. “Ben has, in very consequential ways, altered the framework for how central banks operate in crises,” he said. “Some will criticize it and some will praise it, and it will certainly be examined for decades.”

I am tempted to think of him as somewhat Buddha-like. He’s developed a serenity based on a growing understanding of the hardball ways the system actually works. You can see that it’s no longer an academic or theoretical exercise for him.

These new facilities are Ben’s initiatives. He has been willing to take a fresh look at how the system works and press the boundaries in a thoughtful way.