Ben Bernanke

Academic and government career (1979–2006)

Bernanke taught at the Stanford Graduate School of Business from 1979 until 1985, was a visiting professor at New York University and went on to become a tenured professor at Princeton University in the Department of Economics. He chaired that department from 1996 until September 2002, when he went on public service leave. He resigned his position at Princeton on July 1, 2005.

Bernanke served as a member of the Board of Governors of the Federal Reserve System from 2002 to 2005. In one of his first speeches as a governor, entitled "Deflation: Making Sure It Doesn't Happen Here", he outlined what has been referred to as the Bernanke doctrine.

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 the Great 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.

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. He held the post until January 2006.

Chairman of the United States Federal Reserve

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. By virtue of the chairmanship, he was on the Financial Stability Oversight Board that oversees the Troubled 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. Maria Bartiromo disclosed on CNBC comments from their private conversation at the White House Correspondents' Association Dinner. 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."

2008 financial crisis

As the Great Recession deepened, Bernanke oversaw some unorthodox measures. Under his guidance, the Fed lowered its funds interest rate from 5.25% to 0.0% within less than a year. When this was considered insufficient to abate the liquidity crisis, the Fed initiated quantitative 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.

Second term

On August 25, 2009, President Obama announced he would nominate Bernanke to a second term as chairman of the Federal Reserve. 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 another Great Depression in 2008. 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.

However, Bernanke was confirmed for a second term as chairman on January 28, 2010, by a 70–30 vote of the full Senate, the narrowest margin, at the time, for any occupant of the position. (For the roll-call vote, see Obama 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 a filibuster. On a second vote to confirm, the 30 dissents came from 11 Democrats, 18 Republicans and one independent.

Bernanke was succeeded as chair of the Federal Reserve by Janet Yellen, the first woman to hold the position. Yellen was nominated on October 9, 2013, by President Obama and confirmed by the United States Senate on January 6, 2014.

Controversies as Federal Reserve Chairman

Bernanke has been subjected to criticism concerning the 2008 financial crisis. According to The 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."

Merrill Lynch merger with Bank of America

In a letter to Congress from then-New York State Attorney General Andrew Cuomo dated April 23, 2009, Bernanke was mentioned along with former Treasury Secretary Henry Paulson in allegations of fraud concerning the acquisition of Merrill Lynch by Bank 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. When Ken 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.

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.

AIG bailout

According to a January 26, 2010, column in The Huffington Post, a whistleblower has disclosed documents providing "'troubling details' of Bernanke's role in the AIG bailout". Republican Senator Jim 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 the 2008 financial crisis.

Edward Quince

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." 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."

Economic views

Bernanke has given several lectures at the London School of Economics on monetary theory and policy. He has written two textbooks: an intermediate-level macroeconomics textbook coauthored with Andrew Abel (and also Dean Croushore in later editions) and an introductory textbook, covering both microeconomics and macroeconomics, coauthored with Robert H. Frank. Bernanke was the Director of the Monetary Economics Program of the National Bureau of Economic Research and the editor of the American Economic Review. He is among the 50 most published economists in the world according to IDEAS/RePEc.

Bernanke is particularly interested in the economic and political causes of the Great Depression, on which he has published numerous academic journal articles. Before Bernanke's work, the dominant monetarist theory of the Great Depression was Milton Friedman's view that it had been largely caused by the Federal Reserve's having reduced the money supply and has on several occasions argued that one of the biggest mistakes made during the period was to raise interest rates too early. 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."

Bernanke has cited Milton Friedman and Anna Schwartz in his decision to lower interest rates to zero. Anna Schwartz, however, was highly critical of Bernanke and wrote an opinion piece in The New York Times advising Obama against his reappointment as chairman of the Federal Reserve. Bernanke focused less on the role of the Federal Reserve and more on the role of private banks and financial institutions.

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 the financial 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 a vicious cycle and potentially turning a mild recession into a major depression. Economist Brad DeLong, who had previously advocated his own theory for the Great Depression, notes that the 2008 financial crisis raised the pertinence of Bernanke's theory.

In 2002, following coverage of concerns about deflation in the business news, Bernanke gave a speech about the topic. In that speech, he mentioned that the government in a fiat money system owns the physical means of creating money and to maintain market 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."

He referred to a statement made by Milton 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."

For example, while Greenspan publicly supported President Clinton's deficit reduction plan and the Bush 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 by The Wall Street Journal and a close colleague as a "libertarian-Republican" in the mold of Alan Greenspan.

In 2005 Bernanke coined the term saving glut, the idea that relatively high level of worldwide savings 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.)

As the recession began in 2007, many economists urged Bernanke (and the rest of the Federal Open Market Committee) to lower the federal funds rate below what it had done. For example, Larry Summers, later named Director of the White House's National Economic Council under President Obama, wrote in the Financial 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."

David Leonhardt of The 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."

After the Federal Reserve

In a speech at the American 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.

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".

On October 9, 2014, Bernanke testified in Starr v. United States, a lawsuit alleging that the government cheated American International Group shareholders of $40 billion by demanding a 79.9% stake in the company in exchange for the company's bailout. "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. "We very, very much did not want to make the loan," he said. "We had little information the loan would be effective."

Since February 2014, Bernanke has been employed as a Distinguished Fellow in Residence with the Economic Studies Program at the Brookings Institution.

On April 16, 2015, it was announced publicly that Bernanke will work with Citadel, the $25 billion hedge fund founded by billionaire Kenneth C. Griffin, as a senior adviser. In the same month it was revealed that Bernanke would also join PIMCO as a senior advisor.

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."

Bernanke published in 2022 his latest book titled 21st Century Monetary Policy: The Federal Reserve from the Great Inflation to COVID-19, where he assesses the successes as well as failures of the Federal Reserve since its inception. The book received a positive review from the New York Times saying the "book is intended to help future generations of economic policymakers, and it probably will."

Statements on deficit reduction and reform of Social Security/Medicare

Bernanke favors reducing the U.S. budget deficit, particularly by reforming the Social Security and Medicare entitlement programs. During a speech delivered on April 7, 2010, he warned that the U.S. must soon develop a "credible" plan to address the pending funding 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." 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.

His remarks were most likely intended for the federal government's executive and legislative branches, since entitlement reform is a fiscal exercise that will be accomplished by the Congress and the President rather than a monetary 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 other government spending, or some combination of both.

Nobel Prize

In 2022, Bernanke shared the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel with Douglas Diamond and Philip Dybvig "for research on banks and financial crises." The Royal Swedish Academy of Sciences said the laureates' work improved understanding of banks' role in the economy, particularly during financial crises, and why avoiding bank collapses is important. It highlighted Bernanke's analysis of the Great Depression, which showed how bank runs contributed to the crisis becoming deep and prolonged.

Personal life

Bernanke met his wife, Anna, a schoolteacher, on a blind date and they married on May 29, 1978. The Bernankes have two children, Joel and Alyssa. He is an ardent fan of the Washington Nationals baseball team, and frequently attends games at Nationals Park.

When Bernanke left Stanford to accept a position at Princeton, he and his family moved to Montgomery Township, New Jersey, in 1985, where Bernanke's children attended the local public schools. Bernanke served for six years as a member of the board of education of the Montgomery Township School District.

In 2009, The Wall Street Journal reported that Bernanke was a victim of identity theft, a spreading crime the Federal Reserve has for years issued warnings about.

Bernanke is Jewish. As a teenager in the 1960s, Bernanke helped roll the Torah scrolls in his local synagogue. Although he keeps his beliefs private, his friend Mark Gertler, chairman of New York University's economics department, says they are "embedded in who he (Bernanke) is." Once Bernanke was at Harvard for his freshman year, fellow Dillon native Kenneth Manning took him to Brookline for Rosh Hashanah services.