Only in America*
This is an American story about the rise
of the son of a Jewish druggist from the backwater town to Dillon, South
Carolina to the commanding heights of the global economy. When he is writing
about his boyhood and personal life Bernanke writing shows the benefits of the
creative writing course he took in his freshman year at Harvard. Unfortunately
when he writes about policy making the writing becomes more guarded and
academic. Nevertheless it remains a very lucid account of the financial crisis
and its aftermath.
He chronicles his early life in the
segregated South to his working construction and as waiter at the very touristy
South of the Border rest stop off I-95 to his arrival at Harvard and graduate
school at MIT. From there he goes on to teach at Stanford and Princeton
establishing his reputation as a leading scholar of the depression (See his
“Essays on the Great Depression”)
He leaves academia first to become
appointed a Governor on the Federal Reserve Board by President George W. Bush,
to the chairmanship of the Council of Economic and then in early 2006 to the
chairmanship of the Federal Reserve Board. To my mind the Fed including
Bernanke and other regulators flunked in failing to see the onset of the
financial crisis brought about by reckless lending not only in the housing
markets but through the creation of an array of toxic financial products.
However with the onset of the financial crisis in August 2007 through mid-2009
the Fed and others did indeed have the courage to act. Here Bernanke and crew
get an A in throwing everything but the kitchen sink at the crisis. In my mind
their actions avoided the Great Depression 2.0.
Bernanke argues, correctly in my
opinion, that Lehman Brothers, my former employer, could not have been saved.
At the time it looked Lehman’s balance sheet was too toxic for any private
sector party to handle. It is easy to second guess, but you have to put
yourself in the shoes of the decision makers when they made the decision.
However, while spending quite a bit of time on Lehman, Bernanke gives short
shrift to the two wards of the Fed, Citi and Bank of America/Merrill Lynch.
Were they just as insolvent as Lehman, who knows, but Bernanke doesn’t tell.
With the high drama of the financial
over Bernanke covers his defense of the Fed in the writing of the Dodd-Frank
Financial Reform Act and his growing friendship with Democrat Barney Frank, the
Chair of the House Financial Services Committee. He also highlights his growing
dislike of what I call the “wrecker caucus” within the Republican Party. This
animosity causes him to leave the Republican Party. Who can blame him?
He then goes on to discuss the very
sluggish recovery and the very low rate of inflation. He brings the reader into
the internal Fed debate involving the policy choices to expand the Fed’s
balance sheet with QE2 and QE3 and the continuation of the Zero Interest Rate
Policy throughout his entire term and beyond.
As a result the Fed’s balance sheet quintuples during his tenure in
office. He gives himself high marks in promulgating these policies. Further he
contrasts the relative success of the U.S. economy when compared to Europe and
Japan where more orthodox monetary and fiscal policies were followed.
In this judgement Bernanke is premature.
It is far too early to judge how the 8 year policy of zero rates and the
explosion of the Fed’s balance sheet will look to a future Ben Bernanke writing
in 2025. Remember in 2005 Alan Greenspan looked like a genius and three years
later not so much.
*-With apologies to another Jewish South
Carolinian, Harry Golden.
See the full Amazon URL at:
No comments:
Post a Comment