Ben Bernanke, winner of the Nobel Prize in Economics on Monday (10), helped guide the United States through the 2008 financial crisis as head of the Federal Reserve (Fed, the central bank).
Bernanke, 68, took over as Fed chairman in February 2006, just before the US housing market collapsed that triggered a massive global crisis.
Many analysts say the aggressive and unorthodox measures he took allowed the Fed to strengthen the financial system and keep credit flowing, preventing a repeat of a calamity like the Great Depression of the 1930s, a time of which Bernanke is a scholar.
However, his critics argue that he did little to avert the crisis and may have helped fuel its causes as Fed governor from 2002 to 2005, then under Alan Greenspan; and then head of President George W. Bush’s Council of Economic Advisers (2001-2009).
The Nobel jury awarded him the prize, along with fellow US economists Douglas Diamond and Philip Dybvig, for having “significantly improved our understanding of the role of banks in the economy, particularly during financial crises, and of how to regulate financial markets.”
Bernanke was known for his analysis of the “worst economic crisis in modern history”: the Great Depression of the 1930s. He published a book of essays on the subject and co-authored another on the 2008 financial crisis.
He is now a think tank member at the Brookings Institution and a senior adviser to asset management firms Pimco and Citadel, appointments that have raised concerns about the “revolving door” between Washington and Wall Street.
“Creative Leadership”
In recognition of his actions during the global financial crisis, he was named “Person of the Year” by Time magazine in 2009, which called him “the most important figure guiding the world’s most important economy”.
“His creative leadership helped make 2009 a period of weak recovery rather than a catastrophic depression,” wrote Michael Grunwald, a writer for Time.
Bush’s successor, Democrat Barack Obama, kept Bernanke at the helm of the central bank, a position he held until 2014.
Bernanke has always emphasized the importance of transparency in the monetary entity’s communications, moving away from Greenspan’s bombastic statements. And, unlike his predecessor, he always spoke to the press.
Joseph Brusuelas, managing director at Moody’s Analytics, once said that the Fed’s unorthodox response to the global financial crisis was “unprecedented” as it lowered its benchmark rate to zero and “flooded the financial system with liquidity”.
The Fed’s actions, he added, “slowly rebuilt confidence in the banking system.”
Jeffrey Sachs, an economist at Columbia University, said in September 2008, at the time of the Lehman Brothers collapse, that “a depression seemed possible” but that central bank action “prevented financial markets from collapsing.”
Lehman, “Big Mistake”
Others criticize Bernanke for not foreseeing the gravity of the situation: in 2007, when the first signs of the subprime mortgage crisis appeared, he assured Congress that the consequences would be limited.
Others accuse him of not acting quickly enough to lower interest rates once the magnitude of the crisis became clear, as the Fed adopted a stance of slow rate cuts ahead of the emergency January 2008 cut.
Among Bernanke’s critics, the late economist Allan Meltzer of Carnegie Mellon University, said Lehman’s collapse represented a mistake of historic proportions.
“Allowing the Lehman crash without warning is one of the biggest mistakes in the history of the Federal Reserve,” he wrote in an essay in The Wall Street Journal.
The son of a pharmacist and a teacher, Bernanke was born on December 13, 1953 in a Jewish home in Augusta, Georgia, although he spent his childhood in Dillon, a farming town of 7,500 in South Carolina.
He was a stellar student, achieving an almost perfect grade on the entrance exam. He studied economics at Harvard, graduating with honors in 1975. He then earned a doctorate in economics from MIT (Massachusetts Institute of Technology).
He worked at Princeton for 17 years before joining the Federal Reserve Board in 2002.
Translated by Luiz Roberto Gonçalves.
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