Ben Bernanke was the chair of the board of governors of the U.S. Federal Reserve from 2006 to 2014. Bernanke succeeded Alan Greenspan on February 1, 2006, concluding Greenspan’s 18-year leadership.
A former Federal Reserve governor, Bernanke served as chair of the U.S. President’s Council of Economic Advisors before being nominated as Greenspan’s successor in late 2005.
Key Achievements
- Economic Leadership: Served as Federal Reserve Chair from 2006 to 2014.
- Crisis Response: Spearheaded the central bank’s response to the 2008 financial crisis and the Great Recession.
- Innovative Strategies: Implemented quantitative easing to boost the U.S. economy during the recession.
- Critiqued Actions: Faced criticism for potentially contributing to inflation and increased debt by flooding the economy with money.
From Humble Beginnings to Economic Trailblazer
Born Benjamin Shalom Bernanke on December 13, 1953, he hails from a family with a pharmacist father and a schoolteacher mother in South Carolina. As a high-achieving student, he graduated summa cum laude from Harvard University and later earned his Ph.D. from MIT in 1979.
After serving as an economics professor at Stanford and later at Princeton University, where he chaired the department, Bernanke left the academic world in 2002 to begin his career in public service. He officially departed from Princeton in 2005.
Noteworthy Accomplishments
Bernanke was first nominated as chair of the Federal Reserve by President George W. Bush in 2005. Having been a member of Bush’s Council of Economic Advisors earlier that year, many saw his appointment as a precursor to taking over the Fed’s leadership.
In 2009, President Barack Obama nominated him for a second term, and in 2014, Janet Yellen succeeded him as chair. Before chairing the Federal Reserve, Bernanke was a member of the Federal Reserve’s Board of Governors from 2002 to 2005.
Transformative Economic Contributions
Ben Bernanke was instrumental in rejuvenating the U.S. economy following the 2008 banking crisis. He adopted an aggressive approach to restoring confidence in the financial system.
Strategies Implemented:
- Low-Rate Policy: To stabilize the economy, the Fed drastically reduced the benchmark interest rates to near zero. This made borrowing cheaper for banks, which in turn passed on the lower rates to consumers and businesses.
- Quantitative Easing (QE): Bernanke introduced a QE program, involving the purchase of Treasury bonds and mortgage-backed securities to increase the money supply. This boosted the prices of the bonds, consequently reducing interest rates and lowering financing costs for businesses, fostering job creation, and reducing unemployment.
Shepherd of Economic Bailouts
Bernanke further addressed deteriorating economic conditions by bailing out several major financial institutions. While allowing Lehman Brothers to fail, the Federal Reserve intervened to save companies like AIG Insurance, recognizing the higher risk their bankruptcy posed.
In AIG’s case, its massive liabilities tied to speculative financial products would have had catastrophic effects. For businesses like Merrill Lynch and Bear Stearns, the Fed facilitated their takeovers by guaranteeing bad loans.
Published Works
2013: Released The Federal Reserve and the Financial Crisis, offering insights on the Fed’s history and response during the 2008 crisis.
2015: Published The Courage to Act: A Memoir of a Crisis and Its Aftermath, detailing his experiences during the financial crisis and the extreme measures taken to prevent a complete economic collapse.
Enduring Legacy
Although Bernanke’s role in economic recovery remains indelible, he faced significant criticism. Concerns arose over the excessive money injection through the bond-purchase program, which critics argued increased debt and inflation. Despite opposition from some economists and legislators, President Obama reappointed Bernanke for a second term.
As of August 2022, Ben Bernanke serves as an economist at the Brookings Institution in Washington, DC and as a senior advisor to Citadel.
Frequently Asked Questions
Which Boards Did Ben Bernanke Serve On?
Aside from chairing the Federal Reserve, Bernanke was a member of the Montgomery Township Board of Education in New Jersey for two years and is now an advisor for the Brookings Institution and Citadel.
What Did Bernanke Do During the Financial Crisis?
To mitigate the crisis, Bernanke adopted a low-rate policy and implemented quantitative easing to increase the money supply, in addition to bailing out several large financial institutions.
What Economic Philosophy Does Ben Bernanke Follow?
Bernanke adheres to the Milton Friedman and Anna Schwartz school of thought, advocating that the Federal Reserve can reduce inflation and boost the economy by increasing the money supply in line with the gross national product (GNP).
Conclusion
Ben Bernanke, the former chair of the Federal Reserve, is celebrated for implementing strategies crucial for the U.S. economy’s recovery in difficult times. While his methods sparked debate, resulting in robust job creation and large-scale bailouts, Bernanke’s influence persists as he remains a sought-after economist and advisor, recognized as one of the most impactful Federal Reserve chairs in history.
Related Terms: Federal Reserve, quantitative easing, financial crisis, interest rates, stimulus packages, U.S. economy.
References
- Federal Reserve History. “Ben S. Bernanke”.
- David Wessel. “In Fed We Trust: Ben Bernanke’s War on the Great Panic”, Pages 67, 69. Three Rivers Press, 2010.
- The Brookings Institution. “Ben S. Bernanke”.
- Princeton University. “Faculty Comment on Bush’s Choice of Bernanke for Fed Chair”.
- U.S. Congress. “PN1025 — Ben S. Bernanke — Federal Reserve System”.
- Princeton University. “Bush Chooses Bernanke to Head Economic Council”.
- The White House: The Obama Administration. “The Nomination of Ben Bernanke”.
- Board of Governors of the Federal Reserve System. “Regulatory Reform: Agency Mortgage-Backed Securities (MBS) Purchase Program”.
- Federal Reserve Bank of St. Louis. “Household Financial Stability: Who Suffered the Most from the Crisis?”
- The New York Times. “Revisiting the Lehman Brothers Bailout That Never Was”.
- Board of Governors of the Federal Reserve System. “Regulatory Reform: American International Group (AIG), Maiden Lane II and III”.
- Board of Governors of the Federal Reserve System. “Regulatory Reform: Bear Stearns, JPMorgan Chase, and Maiden Lane LLC”.
- Board of Governors of the Federal Reserve System. “Acquisition of Merrill Lynch by Bank of America”.
- Princeton University Press. “The Federal Reserve and the Financial Crisis”.
- Wiley Online Library. “Ben Bernanke’s The Courage to Act: A Review Essay”.
- PBS NewsHour. “Tough Criticism for Bernanke”.
- Citadel. “Dr. Ben S. Bernanke”.
- The Federal Reserve Board. “Remarks by Governor Ben S. Bernanke At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois, November 8, 2002: On Milton Friedman’s Ninetieth Birthday”.
