Bernanke: Fed’s aggressive recession moves saved day

Ex-Fed chairman, in new book, defends stimulus program.

Former 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 alone in terms of pursuing efforts to get the country out of the worst economic downturn since the Great Depression because of political gridlock in Congress.

“Monetary policy (interest rates controlled by the Fed) can no longer be the only game in town. Fiscal policymakers 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.

The Fed in September decided to delay a rate hike because of concerns about developments in financial markets and China.

But officials have since said rates could still be raised before the end of the year. The Fed has meetings this month and in December.