Ber­nanke de­fends Fed ac­tions to fight re­ces­sion


For­mer U.S. Fed­eral Re­serve Chair­man Ben Ber­nanke says the U.S. econ­omy is out­per­form­ing Europe at the mo­ment be­cause the Fed moved more quickly and ag­gres­sively to fight the 2008 fi­nan­cial cri­sis than Europe did.

Ber­nanke, writ­ing an opin­ion piece in the Wall Street Jour­nal on Mon­day, said that U.S. eco­nomic out­put is 8.9 per­cent higher than its pre­vi­ous peak be­fore the re­ces­sion. That is “an enor­mous dif­fer­ence” from the Eu­ro­zone, where out­put is only 0.8 per­cent higher than its pre­vi­ous peak.

Ber­nanke cred­ited those dif­fer­ences to ag­gres­sive ef­forts by the Fed to jump-start eco­nomic growth. He said the Fed started six years ahead of moves by the Euro­pean Cen­tral Bank.

In his opin­ion piece, Ber­nanke was crit­i­cal of the fact that for too long, the Fed was the only game in town in terms of pur­su­ing ef­forts to get the coun­try out of the worst eco­nomic down­turn since the Great De­pres­sion be­cause of po­lit­i­cal grid- lock in Congress.

“Mon­e­tary pol­icy (in­ter­est rates con­trolled by the Fed) can no longer be the only game in town. Fis­cal pol­icy mak­ers in Congress need to step up,” Ber­nanke wrote. “We need to do more to im­prove worker skills, foster cap­i­tal in­vest­ment and sup­port re­search and de­vel­op­ment.”

Ber­nanke’s opin­ion piece was pub­lished Mon­day, the same day his new book, “The Courage to Act: A Memoir of a Cri­sis and Its Af­ter­math” went on sale in book­stores.

The 610-page memoir, which Ber­nanke be­gan writ­ing af­ter he left the Fed in Jan­uary 2014, is his de­fense of the ex­tra­or­di­nary mea­sures the Fed em­ployed to res­cue the econ­omy af­ter the 2008 fi­nan­cial cri­sis.

Ber­nanke said that the week­end in Septem­ber 2008 when reg­u­la­tors sought des­per­ately but in vain to save in­vest­ment bank Lehman Broth­ers was his worst mo­ment in the cri­sis. He said he was con­cerned that the fail­ure of Lehman, the big­gest bank­ruptcy in U.S. history, could send the en­tire econ­omy into another Great De­pres­sion like the 1930s.

“I was very wor­ried,” Ber­nanke said in an in­ter­view Mon­day with CNBC. “My whole back­ground as an aca­demic was study­ing the Great De­pres­sion, study­ing fi­nan­cial pan­ics, their ef­fect on the econ­omy. And I saw we were hav­ing the grand­daddy of all fi­nan­cial pan­ics about to ex­plode on us and I thought the con­se­quences would be tremen­dous.”

In the in­ter­view, Ber­nanke re­fused to sec­ond-guess the job be­ing done by his suc­ces­sor, Janet Yellen. But he gen­er­ally ex­pressed sup­port for the Fed’s cur­rent stance of mak­ing sure low in­fla­tion is headed back to the Fed’s 2 per­cent goal be­fore start­ing to raise in­ter­est rates.

Ber­nanke, who was Fed chair­man for eight years start­ing in Fe­bru­ary 2006, is now a distin­guished fel­low in res­i­dence at the Brook­ings In­sti­tu­tion in Washington. He said that his wife is much hap­pier with his new job, re­lat­ing her re­ac­tion when he told her he had been tapped for the Fed chair­man’s job.

“When I called to tell her, she broke into tears, and they were not tears of joy,” he said.

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