I know I'm not bear, but have heard the Chairman discuss your question about how they make decisions. The short answer is they do everything by the numbers, using vast stores of data and sophisticated measurement techniques to understand what is going on in the economy and what, if anything, the Fed should do about it. In fact, I believe he is the first Fed Chair to make decisions in this way. Others have used data, of course, but not as the primary mechanism for decision-making.
That is the FIRST STEP as to what the Fed Chair does. He is suppose to go through the data [trailing indicators] and look at the projections [leading indicators] and then run through standard models that should project to within a percent or two what to expect for the next year.
The fact that many economists were looking hard at SubPrime failures 18 months ago and Bernanke was still touting SubPrime as late as Nov06 tells me that he either 1) was not paying attention to the data, 2) he was paying attention to the data but had motive to keep SubPrime floating with optimistic reports or 3) he was paying attention to the data and just got it hard wrong.
Considering his follow-up remarks in March, June, and September I believe that he just did not get it. Much like Bush's Economic folks he thought that you could "buy" your way out of the problem by just flipping the loans. That was the primary solution for the major banks from Q206 to Q307 when it sunk in and the Fed dumped $500B+ into the system to bail them out.
In his reading of the job, that includes deceptive reporting of the economy [according to ME and others]. He blew off the SubPrime issue after several major banks failed because of it. He blew off the SubPrime after the models showed multi $T in HIGH RISK derivatives and hedge funds, leveraged by RE packages. He blew off SubPrime when the CEO of the largest builder in the country [Horton] told his stockholders at the annual meeting n Feb07 "I don't want to be too sophisticated here, but '07 is going to suck, all 12 months of the calendar year". Apparently everyone knew but Bernacke.
But to answer your question, one of the functions of the Fed Chair is to keep the market calm and stable. He tends to do so by obfuscating projections. He has ignored the crashing Dollar, ignored the high energy costs, ignored the increasing food costs, ignored housing and until recently not seen all the elements of recession stacked up.
If he states boldly that we are going into a recession, the various markets will start reacting pretty wild. The stock market will fluctuate more than it is now, commodities markets will go into speculative mode at a worse rate. So he feels he has to temper his remarks. MY thoughts are that he can temper his remarks and let the Economists do their thing by running the real projections and calling a spade a spade. It keeps panic down and allows a more gentle landing [although I think this one might be a hard landing].
The ONE BOGIE that this recession track has that no other has had before is the TV talking heads. So many of them have a vested interest in buy/sell churn, and they have such informational influence that I think many people are going to be getting a wad of poor information and genuine disinformation that is predicated on a few people's desire to salvage the last profits from a churn.
It is late and I rambled. I think that might have answered the question. I have been tracking the last 48 hours of economics and my head is full and my hair hurts.