Inside Financial Services

All Praise To Ben Bernanke

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I rarely agree with very much Steve Rattner has to say, but in this case, I think he’s right on:

When he takes his leave this week, having presided over his final meeting of the Fed’s policy-making committee, [Ben Bernanke] will depart as one of the finest chairmen in the institution’s hundred year history, having played a central role in averting a financial meltdown and lifting the nation out of recession. .. .

And his collegial style allowed him to work effectively with two other extraordinarily capable architects of the rescue: Henry M. Paulson Jr., Mr. Bush’s final Treasury secretary, and Timothy F. Geithner, president of the Federal Reserve Bank of New York and later President Obama’s first Treasury secretary. These men first threw out the playbook from past crises as inadequate to the current challenge and then threw out the rule book, as they formulated innovation after innovation to fight the conflagration. [Emph. added.] You bet! Ben Bernanke’s great strength, in addition to his intelligence and temperament,was his ability to see the credit catastrophe for what it was and understand that extreme measures were needed to pull the financial system back from the abyss. It’s an ironic tribute to his legacy that, having helped saved the world, he’s leaving office as likely the most vilified Fed chairman ever. What his critics (the gold bugs in particular) seem to not realize is that their precious ideologies, the ones Bernanke flagrantly ignored, only make sense if they’re operating within a financial system that’s actually working. But back in 2008 and 2009, the system essentially stopped working. The commercial paper market seized up. Banks stopped trusting the value of each others’ balance sheets. Mighty institutions, from Goldman Sachs to General Electric, stood on the verge of insolvency. Remember? Good times. You can prattle on all you want about the outrage that is fiat-based currency, but back then Bernanke and Paulson had more pressing matters on their minds. And I’ll grant you a thousand times over that, in a normal environment, policies like quantitative easing can be dangerous and misguided. But that wasn’t a normal environment. Extraordinary measures were required, and the country should be grateful that Bernanke and Paulson had the vision to see that. It hasn’t helped any, by the way, that since the recession the White House has pursued policies that are apparently designed to suppress economic growth. Yes,yes, the Fed still has a huge challenge ahead of it as it winds down QE. But that’s nothing compared what the Fed was up against six years ago. In the end, Ben Bernanke helped save the world from financial Armageddon. He’s to be saluted. What do you think? Let me know!

16 Responses to “All Praise To Ben Bernanke”

  1. M. Cook

    maybe you should give him a GP interest in your fund!! Glad he was in charge

  2. M. Cook

    maybe you should give him a GP interest in your fund!! Glad he was in charge

  3. Larry Horan

    Great comment, Tom. As usual, you right on the money.

  4. Robert Buhrmann

    You are correct I think and I believe history will vindicate him.

  5. r

    I agree, once we got into crisis mode. Before that, whom do you think helped get us there? A supposed student of history, he didn’t learn from greenspan’s mistake back in the ’90′s. The mistake of raising interest rates too quickly, not giving previous raises a chance to even begin working through the system, ultimately causing economic distress. Bernanke repeated it. Word for word, or figure for figure if you prefer.

  6. Jeffk

    Couldn’t agree more on the 2008/9 financial mess and he deserves credit for this, but the QE program to stimulate the economy is about as bad and the former was good. He has been like a friend to a terminal alcoholic, providing 170 proof rum. The fed has enabled the government to run massive deficits with no pain and short term consequences. How is the fed going to unwind trillions in debt and how is the government ever going to come anywhere close to a balanced budget now? We have been living in a dream world. The fed will never be able to raise short term interest rates again. The rise in rates would functionally bankrupt our government from the increase in debt costs. We are in the same box the Japanese created for themselves. This is terrible mismanagement and we will be paying for this for decades.
    Jeff K

  7. Chuck S

    Right on Tom. History will show Bernanke to have been a great Fed chairman at a critical time.

  8. roa

    perhaps one should look at his participation in creating the mess to begin with. allowing some banks to over leverage, etc

  9. DSB

    The emergency has been over for 4+ years now, but the policy of exceptionally low rates, continuing subsidies and quantitative easing in all forms have; 1) significantly harmed savers, 2) caused all assets and liabilities in the World to be mispriced, 3) allowed financial institutions and firms to avoid taking the necessary steps to restructure their businesses, 4) allowed the rest of government to avoid material reforms to improve the economic efficiency of the country, 5) contributed to a corporate America more focused on financial engineering to prop up their stock prices than to building better companies and 6) set the stage for a potentially devastating repricing to come. This is but a short list. Any deserved praise is well in the rearview mirror. The history is yet to be written.

  10. Andrew Daniels

    As someone who worked at Citibank for 10 years, and before that GE Capital for 5 years, I am glad that you, Tom, give Bernanke full credit for averting a catastrophe. Seeing great danger in all its potential is one of the true gifts of a leader.

  11. Tony Abbate

    I agree. If his mandate was to prevent a depression, he gets an A+. Too bad he doesn’t get the praise he deserves.

  12. Peter Bianco

    No Fed Governor has done more to advance Socialism than Ben Bernanke. He turned the Federal Reserve from the “lender of last resort” to a Government hedge fund. Under his helm, the Fed’s balance sheet ballooned from $800 billion to north of $4 trillion. That’s about $3 trillion of private property moved to government control. The label “quantitative easing” is a myth and a lie and a deception. As Marx write in Point #5: “…centralization of credit in the hands of the State…”.

  13. Peter Bianco

    Bernanke did more to advance socialism than any other Fed governor.

  14. Wcoth

    Spot on. Not just commercial paper markets were seized up but letters of credit and simple wire transfers via the fed wire system wherein banks were scared a receiving wire would reject and waited til near end of day cutoff deadline to fulfill their commitment for simple fear of the unknown causing havoc encompassing each individual deal….credit officers were in unchartered waters making never-before-unorthodox decisions… fear was rampant. Payment systems were broken….meltdown was around the corner…..but for Bernanke and Company actions.

    Many senior people at levers back in that time likely prefer not to discuss those times as their actions in today’s times would be deemed excessive and unless you were in the boat, you’d never quite be able to explain those actions.

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