From August 5, 2002, until June 21, 2005, he was a member of theBoard of Governors of the Federal Reserve System, proposed theBernanke doctrine, and first discussed "the Great Moderation"—the theory that traditional business cycles have declined in volatility in recent decades through structural changes that have occurred in the international economy, particularly increases in the economic stability of developing nations, diminishing the influence of macroeconomic (monetary and fiscal) policy.
Bernanke then served as chairman of PresidentGeorge W. Bush'sCouncil of Economic Advisers before President Bush nominated him to succeedAlan Greenspan as chairman of the United StatesFederal Reserve.[7] His first term began on February 1, 2006.[8] Bernanke was confirmed for a second term as chairman on January 28, 2010, after being renominated by PresidentBarack Obama, who later referred to him as "the epitome of calm."[9] His second term ended on January 31, 2014, when he was succeeded byJanet Yellen on February 3, 2014.[10]
Bernanke wrote about his time as chairman of the Federal Reserve in his 2015 book,The Courage to Act, in which he revealed that the world's economy came close to collapse in 2007 and 2008. Bernanke asserts that it was only the novel efforts of the Fed (cooperating with other US agencies and agencies of other governments) that prevented an economic catastrophe greater than theGreat Depression.[11]
The Bernankes were one of the fewJewish families in Dillon and attended Ohav Shalom, a local synagogue;[14] Bernanke learnedHebrew as a child from his maternal grandfather, Harold Friedman, a professionalhazzan (cantor),shochet, and Hebrew teacher.[15][16] Bernanke's father and uncle owned and managed a drugstore they purchased from Bernanke's paternal grandfather, Jonas Bernanke.[12]
Jonas Bernanke was born inBoryslav,Austria-Hungary (today part ofUkraine), on January 23, 1891. He immigrated to the United States fromPrzemyśl,Poland, and arrived atEllis Island, aged 30, on June 30, 1921, with his wife Pauline, aged 25. On the ship's manifest, Jonas's occupation is listed as "clerk" and Pauline's as "doctor med".[17][18]
The family moved to Dillon from New York in the 1940s.[19] Bernanke's mother gave up her job as a schoolteacher when her son was born and worked at the family drugstore. Ben Bernanke also worked there sometimes.[14]
As a teenager, Bernanke worked construction on a hospital and waited tables at a restaurant at nearbySouth of the Border, which was a roadside attraction, amusement park, and fireworks retailer near his hometown inHamer, South Carolina, before leaving for college.[12][20][21] To support himself throughout college, he continued to work during the summers at South of the Border.[12][22]
As a teenager in the 1960s, Bernanke helped roll theTorah scrolls in his local synagogue.[23] Although he keeps his beliefs private, his friendMark Gertler, chairman of New York University's economics department, says they are "embedded in who he (Bernanke) is."[24] Once Bernanke was at Harvard for his freshman year, fellow Dillon nativeKenneth Manning took him to Brookline forRosh Hashanah services.[25]
As a member of the board of governors of the Federal Reserve System on February 20, 2004, Bernanke gave a speech in which he postulated that we are in a new era called theGreat Moderation, where modern macroeconomic policy has decreased the volatility of the business cycle to the point that it should no longer be a central issue in economics.[36]
In June 2005, Bernanke was named chairman of President George W. Bush's Council of Economic Advisers and resigned as Fed governor. The appointment was largely viewed as a test run to ascertain if Bernanke could be Bush's pick to succeed Greenspan as Fed chairman the next year.[37] He held the post until January 2006.
On February 1, 2006, Bernanke began a fourteen-year term as a member of the Federal Reserve Board of Governors and a four-year term as chairman.[37][38] By virtue of the chairmanship, he was on theFinancial Stability Oversight Board that oversees theTroubled Asset Relief Program. He also served as chairman of the Federal Open Market Committee, the System's principal monetary policy making body.
His first months as chairman of the Federal Reserve System were marked by difficulties communicating with the media. An advocate of more transparent Fed policy and clearer statements than Greenspan had made, he had to back away from his initial idea of stating clearer inflation goals as such statements tended to affect the stock market.[39]Maria Bartiromo disclosed onCNBC comments from their private conversation at theWhite House Correspondents' Association Dinner.[40] She reported that Bernanke said investors had misinterpreted his comments as indicating that he was "dovish" on inflation. He was sharply criticized for making public statements about Fed direction, which he said was a "lapse in judgment."
As the Great Recession deepened, Bernanke oversaw some unorthodox measures. Under his guidance, the Fed lowered itsfunds interest rate from 5.25% to 0.0% within less than a year. When this was considered insufficient to abate theliquidity crisis, the Fed initiatedquantitative easing, creating $1.3 trillion from November 2008 to June 2010 and using the created money to buy financial assets from banks and from the government.
Bernanke answers questions in 2013 atFOMC press conference
On August 25, 2009, President Obama announced he would nominate Bernanke to a second term as chairman of the Federal Reserve.[41] In a short statement on Martha's Vineyard, with Bernanke standing at his side, Obama said Bernanke's background, temperament, courage and creativity helped to prevent anotherGreat Depression in 2008.[42] When Senate Banking Committee hearings on his nomination began on December 3, 2009, several senators from both parties indicated they would not support a second term.[43][44][45][46][47][48]
However, Bernanke was confirmed for a second term as chairman on January 28, 2010, by a 70–30 vote of the full Senate,[49] the narrowest margin, at the time, for any occupant of the position.[50] (For the roll-call vote, seeObama confirmations, 2010.) The Senate first voted 77–23 to end debate, Bernanke winning more than the 60 approval votes needed to overcome the possibility of afilibuster.[51] On a second vote to confirm, the 30 dissents came from 11 Democrats, 18 Republicans and one independent.[51]
Bernanke was succeeded as chair of the Federal Reserve byJanet Yellen, the first woman to hold the position. Yellen was nominated on October 9, 2013, by President Obama and confirmed by theUnited States Senate on January 6, 2014.[52]
Bernanke has been subjected to criticism concerning the2008 financial crisis. According toThe New York Times, Bernanke "has been attacked for failing to foresee the financial crisis, for bailing out Wall Street, and, most recently, for injecting an additional $600 billion into the banking system to give the slow recovery a boost."[53]
In a letter to Congress from then-New York State Attorney GeneralAndrew Cuomo dated April 23, 2009, Bernanke was mentioned along with former Treasury SecretaryHenry Paulson in allegations of fraud concerning the acquisition ofMerrill Lynch byBank of America. The letter alleged that the extent of the losses at Merrill Lynch was not disclosed to Bank of America by Bernanke and Paulson. WhenKen Lewis, the chief executive officer of Bank of America, informed Paulson that Bank of America was exiting the merger by invoking the "Material Adverse Change" (MAC) clause, Paulson immediately called Lewis to a meeting in Washington. At the meeting, which allegedly took place on December 21, 2008, Paulson told Lewis that he and the board would be replaced if they invoked the MAC clause and additionally not to reveal the extent of the losses to shareholders. Paulson stated to Cuomo's office that he was directed by Bernanke to threaten Lewis in this manner.[54]
Congressional hearings into these allegations were conducted on June 25, 2009, with Bernanke testifying that he did not bully Lewis. Under intense questioning by members of Congress, Bernanke said, "I never said anything about firing the board and the management [of Bank of America]." In further testimony, Bernanke said the Fed did nothing illegal or unethical in its efforts to convince Bank of America not to end the merger. Lewis told the panel that authorities expressed "strong views" but said he would not characterize their stance as improper.[55]
According to a January 26, 2010, column inThe Huffington Post, awhistleblower has disclosed documents providing"'troubling details' of Bernanke's role in the AIG bailout". Republican SenatorJim Bunning of Kentucky said on CNBC that he had seen documents which show that Bernanke overruled recommendations from his staff in bailing out AIG. The columnist says this raises questions as to whether or not the decision to bail out AIG was necessary. Senators from both parties who support Bernanke say his actions averted worse problems and outweighed whatever responsibility this may have created for the2008 financial crisis.[56]
The crisis in 2008 also made Ben Bernanke create a pseudonym, Edward Quince. According to the Wall Street Journal, the false name was evidence in a class-action lawsuit against the government by shareholders of AIG, which had been given a Fed-backed bailout when it was near collapse (see below). One of Mr. Quince's emails reads, "We think they are days from failure. They think it is a temporary problem. This disconnect is dangerous."[57] Upon the revelation of the Quince pseudonym during the Starr v. United States trial,The New York Times created a cocktail inspired by Mr. Bernanke's chosen alias: the "Rye & Quince."[58]
With his predecessor,Alan Greenspan, looking on, Chairman Ben Bernanke addresses PresidentGeorge W. Bush and others after being sworn into theFederal Reserve post. Also on stage with the President are Mrs. Anna Bernanke andRoger W. Ferguson Jr., Vice Chairman of the Federal Reserve.
Bernanke has given several lectures at theLondon School of Economics onmonetary theory and policy. He has written two textbooks: an intermediate-level macroeconomics textbook coauthored withAndrew Abel (and also Dean Croushore in later editions) and an introductory textbook, covering both microeconomics and macroeconomics, coauthored withRobert H. Frank. Bernanke was the Director of the Monetary Economics Program of theNational Bureau of Economic Research and the editor of theAmerican Economic Review. He is among the 50 most published economists in the world according toIDEAS/RePEc.[59]
Bernanke is particularly interested in the economic and political causes of theGreat Depression, on which he has published numerous academic journal articles. Before Bernanke's work, the dominantmonetarist theory of the Great Depression wasMilton Friedman's view that it had been largely caused by theFederal Reserve's having reduced themoney supply and has on several occasions argued that one of the biggest mistakes made during the period was to raise interest rates too early.[60] In a speech on Milton Friedman's ninetieth birthday (November 8, 2002), Bernanke said:
"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna [Schwartz, Friedman's coauthor]: Regarding the Great Depression, you're right. We did it. We're very sorry. But thanks to you, we won't do it again."[61][62]
Bernanke has cited Milton Friedman andAnna Schwartz in his decision to lower interest rates to zero.[63] Anna Schwartz, however, was highly critical of Bernanke and wrote an opinion piece inThe New York Times advising Obama against his reappointment as chairman of the Federal Reserve.[64] Bernanke focused less on the role of the Federal Reserve and more on the role of private banks and financial institutions.[65]
Bernanke found that the financial disruptions of 1930–33 reduced the efficiency of the credit allocation process; and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand, identifying an effect he called thefinancial accelerator. When faced with a mild downturn, banks are likely to significantly cut back lending and other risky ventures. This further hurts the economy, creating avicious cycle and potentially turning a mild recession into a major depression.[66] EconomistBrad DeLong, who had previously advocated his own theory for the Great Depression, notes that the2008 financial crisis raised the pertinence of Bernanke's theory.[67]
In 2002, following coverage of concerns aboutdeflation in the business news, Bernanke gave a speech about the topic.[68] In that speech, he mentioned that the government in afiat money system owns the physical means of creating money and to maintainmarket liquidity. Control of the money supply implies that the government can always avoid deflation by simply issuing more money. He said, "The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost."[68]
He referred to a statement made byMilton Friedman about using a "helicopter drop" of money into the economy to fight deflation. Bernanke's critics have since referred to him as "Helicopter Ben" or to his "helicopter printing press." In a footnote to his speech, Bernanke noted that "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation."[68]
For example, while Greenspan publicly supported President Clinton's deficit reduction plan and theBush tax cuts, Bernanke, when questioned about taxation policy, said that it was none of his business, his exclusive remit being monetary policy, and said that fiscal policy and wider society related issues were what politicians were for and got elected for. But Bernanke has been identified byThe Wall Street Journal and a close colleague as a "libertarian-Republican" in the mold of Alan Greenspan.[63]
In 2005 Bernanke coined the termsaving glut, the idea that relatively high level of worldwidesavings was holding down interest rates and financing the current account deficits of the United States. (Alternative reasons include relatively low worldwide investment coupled with low U.S. savings.)[69]
As the recession began in 2007, many economists urged Bernanke (and the rest of theFederal Open Market Committee) to lower thefederal funds rate below what it had done. For example,Larry Summers, later named Director of the White House'sNational Economic Council under President Obama, wrote in theFinancial Times on November 26, 2007—in a column in which he argued that recession was likely—that "maintaining demand must be the over-arching macro-economic priority. That means the Federal Reserve System has to get ahead of the curve and recognize—as the market already has—that levels of the Federal Funds rate that were neutral when the financial system was working normally are quite contractionary today."[70]
David Leonhardt ofThe New York Times wrote, on January 30, 2008, that "Dr. Bernanke's forecasts have been too sunny over the last six months. [On] the other hand, his forecast was a lot better than Wall Street's in mid-2006. Back then, he resisted calls for further interest rate increases because he thought the economy might be weakening."[71]
In a speech at theAmerican Economics Association conference in January 2014, Bernanke reflected on his tenure as chairman of the Federal Reserve. He expressed his hope that economic growth was building momentum and stated that he was confident that the central bank would be able to withdraw its support smoothly.[72]
In an October 2014 speech, Bernanke disclosed that he was unsuccessful in efforts to refinance his home. He suggested that lenders "may have gone a little bit too far on mortgage credit conditions".[73]
On October 9, 2014, Bernanke testified inStarr v. United States, a lawsuit alleging that the government cheatedAmerican International Group shareholders of $40 billion by demanding a 79.9% stake in the company in exchange for the company's bailout.[74][57] “Certainly there was an enormous amount of stress on financial institutions” in the fall of 2008 after mortgage financiers Fannie Mae and Freddie Mac had been taken over by the government and fear cascaded through financial markets," Bernanke said.[75][76] “We very, very much did not want to make the loan,” he said. “We had little information the loan would be effective.”[77]
Since February 2014, Bernanke has been employed as a DistinguishedFellow in Residence with the Economic Studies Program at theBrookings Institution.[78]
On April 16, 2015, it was announced publicly that Bernanke will work withCitadel, the $25 billion hedge fund founded by billionaireKenneth C. Griffin, as a senior adviser.[79] In the same month it was revealed that Bernanke would also joinPIMCO as a senior advisor.[80]
In his 2015 book,The Courage to Act, Bernanke revealed that he was no longer a Republican, having "lost patience with Republicans' susceptibility to the know-nothing-ism of the far right. ... I view myself now as a moderate independent, and I think that's where I'll stay."[81]
Bernanke published in 2022 his latest book titled21st Century Monetary Policy: The Federal Reserve from the Great Inflation to COVID-19, where he assesses the successes as well as failures of theFederal Reserve since its inception. The book received a positive review from theNew York Times saying the "book is intended to help future generations of economic policymakers, and it probably will."[82]
Statements on deficit reduction and reform of Social Security/Medicare
Bernanke favors reducing theU.S. budget deficit, particularly by reforming theSocial Security andMedicareentitlement programs. During a speech delivered on April 7, 2010, he warned that the U.S. must soon develop a "credible" plan to address the pendingfunding crisis faced by "entitlement programs such as Social Security and Medicare" or "in the longer run we will have neither financial stability nor healthy economic growth."[83][84] Bernanke said that formulation of such a plan would help the economy in the near term, even if actual implementation of the plan might have to wait until the economic outlook improves.[85]
His remarks were most likely intended for the federal government's executive and legislative branches,[86] since entitlement reform is afiscal exercise that will be accomplished by theCongress and thePresident[87][88] rather than amonetary task falling within the implementation powers of the Federal Reserve. Bernanke also pointed out that deficit reduction will necessarily consist of either raising taxes, cutting entitlement payments and othergovernment spending, or some combination of both.[89]
In 2022 Bernanke was awarded the Nobel Memorial Prize in Economic Sciences along withPhilip H. Dybvig andDouglas Diamond. Their research suggested that the Great Depression was caused by a variety of factors including credit market stress and a failing gold standard. With a risingExternal Finance Premium lenders and borrowers were both inclined to protect their financial health due to stressed credit markets. Lenders began tightening credit standards and avoiding risky borrowers while borrowers withdrew their cash. These self-preservation decisions from both lenders and borrowers resulted in further stress on the credit market and stagnation in investment spending. In addition to stressed credit markets, the failing gold standard also played a crucial role. After World War 1 most countries had their currencies tied to gold as well as fixed exchange rates, however, post-war animosity between many European nations led to non-cooperation regarding the gold standard. Consequently, the gold standard failed in the late 1920s, bringing prices, money supply, and output down with it. Their research showed that the combination of a failing gold standard and stressed credit markets led to a catastrophic spiral in the economy.[90]
Bernanke met his wife, Anna, a schoolteacher, on ablind date. The Bernankes have two children, Joel and Alyssa.[91] He is an ardent fan of theWashington Nationals baseball team, and frequently attends games atNationals Park.[92]
When Bernanke left Stanford to accept a position at Princeton, he and his family moved toMontgomery Township, New Jersey, in 1985, where Bernanke's children attended the local public schools.[93] Bernanke served for six years as a member of the board of education of theMontgomery Township School District.[93]
In 2009,The Wall Street Journal reported that Bernanke was a victim ofidentity theft, a spreading crime the Federal Reserve has for years issued warnings about.[94]
Bernanke, Ben S. (June 1983). "Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression".American Economic Review.73 (3):257–276.JSTOR1808111.
Bernanke, Ben S.;Blinder, Alan S. (September 1992). "The Federal Funds Rate and the Channels of Monetary Transmission".American Economic Review.82 (4):901–921.JSTOR2117350.
Bernanke, Ben S. (May 2022).21st Century Monetary Policy: The Federal Reserve from the Great Inflation to COVID-19. W. W. Norton & Company.ISBN978-1324020462.
^Bernanke's first name is Ben, not Benjamin, and "Ben Shalom" is not abbreviated. (See: "Big Ben",Slate, October 24, 2005; see also "Presidential Nomination: Ben Shalom Bernanke",George W. Bush White House, January 2009)
^Hilsenrath, Jon; Williamson, Elizabeth; Weisman, Jonathan (August 26, 2009)."Calm in Crisis Won Fed Job".The Wall Street Journal.Archived from the original on February 4, 2010. RetrievedJanuary 30, 2010.
^anna schwartz (July 25, 2009)."Man Without a Plan".The New York Times. RetrievedDecember 13, 2012.
^Bernanke, Ben S., "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression",American Economic Review, 73 (June 1983), pp. 257–76.
^Bernanke, Ben S.,"Economic Challenges: Past, Present and Future (HTML version)" (see paragraphs 4, 5 and 6 in the "Economic Challenges" section at the end of the speech transcript). Speech given on April 7, 2010, to the Dallas Regional Chamber of Commerce in Dallas, Texas. Retrieved April 15, 2010.
^abChan, Sewell.'Is Ben Bernanke Having Fun Yet?",The New York Times, May 15, 2010. Accessed February 2, 2015. "In 1985, he left Stanford for Princeton. His children — Joel, born in 1982, and Alyssa, born in 1986 — enrolled in public schools, and for six years he served on the school board in Montgomery Township, N.J."
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