Ben Shalom Bernanke took over as chairman of the Federal Reserve Board on February 1, 2006, replacing Alan Greenspan. Congress decided this way because Bernanke knew how monetary policy contributed to the Great Depression and believed in inflation targeting.
Crisis Manager
To prevent a global depression in the early stages of the banking crisis, he created many innovative Fed tools.
Bernanke led the US Federal Reserve when it took on a new role, such as bailing out Bear Stearns and insurance giant AIG with $150 billion in bailouts. To stop the global panic, the Fed has loaned $540 billion to financial institutions.
Ben Bernanke (pictured later in the article) also pushed for more open market operations when lower interest rates alone were not enough to end the 2008 crisis. He pursued a policy of simultaneously lowering long-term interest rates and raising short-term ones.
Ben Bernankeresigned as Fed chief on January 31, 2014. He was replaced by former deputy head of the Federal Reserve Janet Yellen, who is sympathetic to his policies.
Important to the US economy
Federal Reserve Chairman Ben Bernanke was responsible for directing US monetary policy. The Fed's role has grown in importance over the past decade as the massive national debt has made fiscal policy more difficult to manage. As a spokesman for the Fed, Bernanke was the country's chief economic expert, and his words influenced the stock market and the dollar. During his tenure as chairman of the Federal Reserve, he was the most important person in the US and therefore in the global economy.
Fed Chair Duties
Despite the fact that the Federal Open Market Committee is in charge of setting and executing monetary policy, the chairman of the Fed traditionally takes a leading role. Because he is appointed for a four-year term, he is expected to be more independent than an elected official who is accountable to the electorate. This allows the Fed to work for the long term, rather than react to momentary political pressure. The Fed's instruments, such as the federal funds rate, are slow to move for six months. The US economy, like a big ship, needs a gradual direction. Stop-go monetary policy leads to uncertainty, which was one of the main causes of stagflation in the 1970s.
Crisis of 2008
Under Bernanke, the Fed used the tools available to it in a very creative way. Previous chairs have only used the federal funds rate-raising it to stop inflation or lowering it to prevent a recession. Between September 2007 and December 2008, Bernanke decisively cut the rate 10 times from 5.25% to 0%.
But that was not enough to restore liquidity to banks that panicked after the default of subprime mortgages. These loans were reformulated and sold as mortgage-backed securities so complex that no one really could figure out who was in bad debt.
As a result, banks stopped short-term lending, which was commonly used as a way to meet the Fed's reserve requirements. In response, Bernanke weakened them, lowered the discount rate, and, finally, he provided a loan through the discount window.
When that wasn't enough, in December 2007 he created TAF, through which the Fed lent billions of dollars to banks, taking bad debts as collateral. TAF was meant to be a temporary measure until financial institutions write off the bad debt and start lending to each other again. When that didn't happen, TAF got bigger, peaking at $1 trillion in June 2008.
Saving the global financial system
Bernanke worked with central banks around the world to restore liquidity when credit markets werefrozen. He increased overnight and short-term credit swap lines designed to keep the U. S. currency in trade with other countries by $180 billion. This was necessary because the banks began stockpiling cash in a panic. They were afraid to lend to each other because they didn't want to be left with subprime derivatives.
In April 2008, Ben Bernanke's Fed held its first emergency meeting in 30 years to guarantee Bear Stearns loans so JP Morgan could buy them. This avoided the $10 trillion in default that Bear Stearns owned, and the banks were able to breathe a sigh of relief for several months. In the II quarter. By 2008, the economy was growing and many thought disaster had been averted.
But in September 2008, the world's largest insurance company AIG announced a possible bankruptcy. AIG has insured trillions of dollars of mortgages worldwide. If the company collapsed, it would hit every bank, hedge fund, and pension fund that held mortgage-backed securities as an asset. Bernanke said AIG support pissed him off more than anything else during the recession. AIG has assumed exposure to non-regulated products such as credit default swaps, while using public insurance policy cash.
Criticism
Many lawmakers and economists have criticized Helicopter Ben for injecting many trillions of dollars into the economy, potentially causing inflation and increasing debt. Others blamed him forhe did not foresee the recession in time. He was charged with concealing information about banks that received up to $ 2 trillion in TAF loans. Rep. Ron Paul and others have called for an audit by the Fed to disclose the names of these financial institutions. Ben Bernanke, who was not well received by many legislators, was in danger of not being reappointed in January 2010. But Obama did it with ease.
Life after retirement
Shortly after the resignation, a book of memoirs about the crisis and its consequences, authored by Ben Bernanke, appeared. "The Courage to Act" describes his time at the head of the Fed, and also contains an admission that he is no longer a Republican, as he was fed up with "the predisposition of members of this party to the ignorance of the far right." According to him, today he is a moderate independent and plans to remain so in the future.
In addition, he is the author of a number of books on economics, including:
- "Non-monetary consequences of the financial crisis during the spread of the Great Depression",
- "Macroeconomics of the Great Depression",
- "Inflation targeting: lessons from international experience",
- textbook "Macroeconomics" (Ben Bernanke, Andrew Abel).
In February 2014, he became an Honorary Fellow of the Brookings Institution. Advises the Hutchins Center on public information on tax and monetary policy and promotes its effectiveness.
Ben Bernanke:biography
Bernanke was born on 12/13/53 in Augusta, Georgia, and grew up in Dillon, South Carolina. Ben's father was a pharmacist and his mother was a teacher.
At age 12, he won the state spelling contest. He independently studied differential and integral calculus, since this subject was absent at his school. Ben also played the alto saxophone.
He graduated summa cum laude in economics from Harvard University (1975) and received his Ph. D. from MIT (1979).
Ben Bernanke and his wife Anna registered their marriage on May 29, 1978. They had two children.
He began teaching economics at Stanford University, where he worked from 1979-1985. He became a full professor in 1985 when he moved to Princeton University and has also been a visiting faculty member at New York University and MIT. He has published extensively on a range of economic topics, including macroeconomics, monetary policy, the Great Depression, and business cycles.
He received Guggenheim and Sloan Fellowships and became editor of the American Economic Review in 2001. The following year, he was appointed to the Fed's Board of Governors and became known for his meticulous research and diplomacy when opinions differed among governors. Bernanke's political influence became apparent in early 2005 when he was appointed chairman of the President's Council on Economic Affairs.
In 2009, Time magazine named him Person of the Year.
Philosophy
Ben Bernanke was less outspoken than Greenspan, who regularly spoke on non-monetary issues, including budget deficits and tax cuts. He has also been a strong advocate of a more transparent Federal Reserve, a clear departure from Greenspan's "fed language" to keep markets from overreacting to his remarks.
An insight into Ben Bernanke's personal philosophy comes from the economist's books and commentaries.
Inflation targeting
Ben Bernanke reversed the course of the Greenspan-era Fed by setting a specific numerical inflation target. While many European banks, including the Bank of England and the European Central Bank, set specific targets, the United States did not, and Greenspan was not in favor of such an approach.
In Bernanke's early days, these basic philosophical and stylistic differences with Greenspan stirred up the markets. The possibility of a shift to a targeting policy has worried some analysts, as Greenspan has never tried to keep a firm bet. This awkwardness was removed when Bernanke stopped voicing specific numbers.
Since then, he has continued the Fed's policy of being more open, especially when he increased the frequency of his forecasts in late 2007. The Federal Reserve has begun publishing quarterly economic forecasts.growth and prices, compared with the previous half-year. They also began to cover a three-year period, compared to the previous two years.
Deflation
Ben Bernanke's study of the Great Depression instilled in him a lifelong interest in the effects of deflation and its impact on people's lives. He also developed a strong dislike for deflation and placed a strong emphasis on preventing it.
His feelings on the matter were clarified when, in November 2002, he gave a speech titled "Deflation: How to Ensure It Doesn't Happen". He was referring to economist Milton Friedman's idea of dropping money into the economy from a helicopter. Increasing market liquidity by increasing the availability of money to borrowers and lowering interest rates to increase borrowing helps stimulate the economy and stem deflationary pressures. However, in the context of the meeting, it was meant to illustrate the range of tools the Fed has at its disposal, even at zero rates.
Inflation
While containing deflationary pressures by increasing the money supply may have a clear inflationary effect, this does not mean that Bernanke underestimated inflation. He supported its targeting to keep it relatively low and stable to stimulate sustainable economic growth.
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Ben Bernanke, an economist, was well versed in the aftermath of the Great Depression, one of the biggest financial disasters in the US, and his style was shaped by his years at the Federal Reserve. His appointment continued the course set by his predecessor and was well received by the financial markets, as the succession of the Fed chairman is the key to their stability.
