January 31, 2014
Steve Rattner gives us a glowing appraisal of Ben Bernanke on his departure from the Fed. I have written on Bernanke elsewhere, but the basic story is that he bears a large amount of responsibility for the housing bubble and its subsequent bursting, since he was a Fed governor and chief economic advisorin the Bush administration as policymakers allowed it to grow to ever more dangerous levels. The result has been a loss of more than $7.6 trillion in output to date ($25,000 per person) and an economy that is still down more than 8 million jobs six years after the beginning of the downturn. There were few people better positioned than Bernanke to try to stem the growth of the bubble, but he consistently insisted that it did not pose any problem to the economy.
Bernanke also made the decision to leave the financial industry intact at a time when the market would have sent Goldman Sachs, Citigroup and most of the other Wall Street giants into bankruptcy. He misled Congress to rush it into passage of the TARP and he gave hundreds of billions of dollars worth of loan subsidies and guarantees to keep Wall Street alive. As a result, the financial industry is more concentrated than ever.
Bernanke does deserve credit for his aggressive monetary policy in the face of harsh opposition from Republicans and some Democrats. It has boosted the economy, although other banks, notably the Bank of Japan, have been more aggressive. Anyhow, his monetary policy over the last four years certainly is a plus, but it doesn’t qualify Bernanke as a “godsend” by the usual meaning of the word.
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