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Bernanke, Feats and Flaws

Wednesday 26 August 2009

by: Jean-Marc Vittori  |  Les Echos

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Jean-Marc Vittori writes of Bernanke: "He did nothing to fight against the too-loose regulation of financial institutions - inherited from his predecessor - and that was one of the causes of the crisis." (Photo: Mike Theiler / EPA via Sipa Press file)

    The markets are big babies. They always need to be reassured, especially under the current circumstances. That's why the president of the United States has renewed Ben Bernanke's tenure at the head of the Federal Reserve. The announcement, which will have to be confirmed by the Senate, was welcomed with a 21-gun salute by the financial exchanges.

    It's true that, in the unbelievable financial collapse that we have just lived through, the planet has been wildly lucky. On Constitution Avenue, in the Art Deco building that shelters the United States's central bank, one man knew what to do. In 1987, it was Alan Greenspan. Six weeks before the October crash, the Fed boss had requested simulations to study what measures to take in the event of a sharp stock market drop. In 2008, it was Ben Bernanke. Six years before Lehman Brothers's failure, he had explained in a speech what had to be done to avoid a new Great Depression scenario. This former academic, who had spent over a decade exploring the financial arcana of the 1930s, did not hesitate to reduce interest rates to zero percent, to inject over a trillion dollars into American banks to save them from disaster, to buy massive quantities of rotten securities and Treasury bills. Without his rapid, massive and audacious interventions, Wall Street would have dragged the global economy down into an infernal spiral of depression.

    And yet, Bernanke's first term has worrying aspects all the same. First of all, he did nothing to fight against the too-loose regulation of financial institutions - inherited from his predecessor - and that was one of the causes of the crisis. Then, he understood far too late - right up until the fall of Lehman Brothers - that the subprime market was going to cause the whole financial system to totter. And then, his record is applauded by the entire financial community, which could indicate that he has served the interests of that community more than the public interest - and the crisis has shown the chasm that exists between those two. Finally, as he wrote in his "Principles of Economics," "the Fed busies itself to eliminate expansionary digressions as well as recessionary digressions." His effectiveness in "expansionary digressions" remains to be proven. Now, if we are to believe one of Bernanke's distant predecessors, the central banker's art is not to be judged by his ability to turn on the spigot, so much as by his ability to "take away the punch bowl just when the party starts getting interesting." Let's hope that he will show his mettle in that regard during his new term.

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    Translation: Truthout French language editor Leslie Thatcher.

  

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Comments

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Well, each to his own, but I

 Thu, 08/27/2009 - 18:31 — mike (not verified)
Well, each to his own, but I personally saw no evidence whatsoever in the claims of the Democrats and Republics that the collapse of a few private companies and banks "would have dragged the global economy down into an infernal spiral of depression," and that they therefore needed to bankrupt the country in order to bail out their corporate buddies. To me these claims are exactly like the claims of the Democrats and Republicans that Iraq had WMDs, and that we were only 45 minutes away from total destruction, which has been shown to be utter nonsense. In both cases, we have an incredibly corrupt group of corporate elitists using fear tactics (essentially terrorism) to create a false crisis in order to do things that only favored their corporate buddies. And, also exactly like Iraq, the actions taken by Bernanke and his fellow banksters have in fact created much, much worse problems, and more longer lasting problems, than may have originally existed. I also think it is appalling that a Democratic president, Obama, like Clinton before him, has reappointed a conservative Republican to such an important office. How dare he?

Who the president pics to

 Fri, 08/28/2009 - 15:35 — Anonymous (not verified)
Who the president pics to run the FED comes from a list he's given by the FED. He must choose from that list. This man who now controls all the money the government may borrow works for the financial cabal that has destroyed this country for the last century. Never forget, the FED is not a part of the government. It is a private bank made up of member banks from the US and Europe, (Rothchild). Its boards and personal membership are so secret that not even congress can get the list. These members, (some not Americans), often vote on the value of US dollars, the interest rate, and if more money should be printed or not - or some taken out of circulation. This is not always in the best interest of the US but usually what's in the best interest of the FED. The constitution states that "congress shall coin money and determine its value thereof". Woodrow Wilson took care of that when he got congress to give that power to the FED, a private bank with private motives.