Ben Bernanke Explained

Ben Bernanke
Office:14th Chairman of the Federal Reserve
President:George W. Bush
Barack Obama
Deputy:Roger Ferguson
Donald Kohn
Janet Yellen
Term Start:February 1, 2006
Predecessor:Alan Greenspan
Office2:23rd Chairman of the
Council of Economic Advisers
President2:George W. Bush
Term Start2:June 21, 2005
Term End2:January 31, 2006
Predecessor2:Harvey Rosen
Successor2:Edward Lazear
Office3:Member of the Board of Governors of the Federal Reserve System
Nominator3:George W. Bush
Term Start3:August 5, 2002
Term End3:June 21, 2005
Birth Date:13 December 1953
Birth Place: U.S.
Party:Republican Party
Spouse:Anna Friedmann
Alma Mater:Harvard University
Massachusetts Institute of Technology

Ben Shalom Bernanke[1] (;[2] born December 13, 1953) is an American economist, and the current Chairman of the Federal Reserve, the central bank of the United States. During his tenure as Chairman, Bernanke has overseen the response of the Federal Reserve to late-2000s financial crisis.

Bernanke was a tenured professor at Princeton University and was chair of the Department of Economics there from 1996 to September 2002, when he went on public service leave. From 2002 until 2005, he served as a member of the Board of Governors of the Federal Reserve System. Here he outlined the Bernanke Doctrine and first spoke of the Great Moderation, where he postulated that we are in a new era, where modern macroeconomic policy has decreased the volatility of the business cycle. He then served as Chairman of President George W. Bush's Council of Economic Advisers before President Bush appointed him to be Chairman of the United States Federal Reserve on February 1, 2006. Bernanke was confirmed for a second term as Chairman on January 28, 2010, after being nominated by President Barack Obama.

Early and personal life

Bernanke was born in North Augusta, South Carolina, and was raised in a ranch-style house on East Jefferson Street in Dillon, South Carolina.[3] His father Philip was a pharmacist and part-time theater manager, and his mother Edna was an elementary schoolteacher.[4] He is the eldest of three children, having a brother and sister. His younger brother, Seth, is a lawyer in Charlotte, North Carolina, and his younger sister, Sharon, is a longtime administrator at Berklee College of Music in Boston.

The Bernankes were one of the few Jewish families in the area, attending a local synagogue called Ohav Shalom;[5] as a child, Bernanke learned Hebrew from his maternal grandfather Harold Friedman, who was a professional hazzan, shochet, and Hebrew teacher.[6] [7] His father and uncle co-owned and managed a drugstore that they bought from his paternal grandfather, Jonas Bernanke.[3] Jonas was born in Boryslav, Austria-Hungary (today part of Ukraine), on January 23, 1891, and emigrated to the United States from Przemyśl, Poland (part of Austria-Hungary until 1918). He arrived at Ellis Island, aged 30, on June 30, 1921, with his wife Pauline, aged 25. On the ship's manifest, Jonas's occupation is listed as "clerk" and Pauline's as "doctor med."[8] [9] [10] [11] They moved to Dillon, from New York in the 1940s.[12] Bernanke's mother often worked in the family drugstore, having given up her job as a school teacher when her son was born, and Bernanke also assisted from time to time.[5]

Young adult

Bernanke worked construction on a new hospital and waited tables at a restaurant at nearby South of the Border, a roadside attraction in his hometown of Dillon, before leaving for college.[3] [13] To support himself throughout college, he worked during the summers at South of the Border.[3] [14]


As a teenager in the 1960s in the small town of Dillon, Bernanke used to help roll the Torah scrolls in his local synagogue. Although he keeps his beliefs private, his friend Mark Gertler, chairman of New York University's economics department, commented in 2005 that, "it is really embedded in who he (Bernanke) is".[15] On the other hand, the Bernanke family was concerned that Ben would "lose his Jewish identity" if he went to Harvard. Fellow Dillon native Kenneth Manning, an African American who would eventually become a professor of the history of sciences at MIT, helped assure the family that "there were Jews in Boston". Once at Harvard, Manning took Bernanke to a Rosh Hashanah services in Brookline his freshman year. Manning says that he found the services more meaningful than Bernanke did.[16]


Bernanke was educated at East Elementary, J. V. Martin Junior High, and Dillon High School, where he was class valedictorian and played saxophone in the marching band.[17] Since his high school did not offer calculus, he taught it to himself.[18] [19] Bernanke achieved an SAT score of 1590 out of 1600.[18] [20] Bernanke attended Harvard University, where he lived in Winthrop House with the future CEO of Goldman Sachs, Lloyd Blankfein, and graduated with a Bachelor of Arts in economics summa cum laude in 1975. He received his Doctor of Philosophy in economics from the Massachusetts Institute of Technology in 1979. His thesis was named Long-Term Commitments, Dynamic Optimization, and the Business Cycle; his thesis adviser was the future governor of the Bank of Israel, Stanley Fischer, and his readers included Irwin S. Bernstein, Rudiger Dornbusch, and Robert Solow of MIT, as well as Peter Diamond and Dale Jorgenson of Harvard.[21]

Adult life

Bernanke met his wife Anna, a schoolteacher, on a blind date. She was a student at Wellesley College, and he was in graduate school at MIT. The Bernankes have two children.[22]

Academic and government career

Bernanke taught at the Stanford Graduate School of Business from 1979 until 1985, was a visiting professor at New York University and went on to become a tenured professor at Princeton University in the Department of Economics. He chaired that department from 1996 until September 2002, when he went on public service leave. He resigned his position at Princeton July 1, 2005.

Bernanke served as a member of the Board of Governors of the Federal Reserve System from 2002 to 2005. In one of his first speeches as a Governor, entitled "Deflation: Making Sure It Doesn't Happen Here", he outlined what has been referred to as the Bernanke Doctrine.[23]

As a Member of the Board of Governors of the Federal Reserve System on February 20, 2004, Bernanke gave a speech in which he postulated that we are in a new era called the Great Moderation, where modern macroeconomic policy has decreased the volatility of the business cycle to the point that it should no longer be a central issue in economics.[24]

In June 2005, Bernanke was named Chairman of President George W. Bush's Council of Economic Advisers, and resigned as Fed Governor. The appointment was widely viewed as a test run to ascertain if Bernanke could be Bush's pick to succeed Greenspan as Fed chairman the next year.[25] He held the post until January 2006.

Chairman of the United States Federal Reserve

On February 1, 2006, President Bush appointed Bernanke to a fourteen-year term as a member of the Federal Reserve Board of Governors, and to a four-year term as Chairman.[25] [26] By virtue of the chairmanship, he sits on the Financial Stability Oversight Board that oversees the Troubled Asset Relief Program. He also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policy making body.

His first months as chairman of the Federal Reserve System were marked by difficulties communicating with the media. An advocate of more transparent Fed policy and clearer statements than Greenspan had made, he had to back away from his initial idea of stating clearer inflation goals as such statements tended to affect the stock market. Maria Bartiromo disclosed on CNBC comments from their private conversation at the White House Correspondents' Association Dinner.[27] She reported that Bernanke said investors had misinterpreted his comments as indicating that he was "dovish" on inflation. He was sharply criticized for making public statements about Fed direction, which he said was a "lapse in judgment."

During Bernanke's first term as Chairman, the Federal Reserve experienced its largest increase of power since its creation in 1913.[28]

On August 25, 2009, President Obama announced he would nominate Bernanke to a second term as chairman of the Federal Reserve. In a short statement in Martha's Vineyard, with Bernanke standing at his side, Obama said Bernanke's background, temperament, courage and creativity helped to prevent another Great Depression in 2008.[29] When Senate Banking Committee hearings on his nomination began on December 3, 2009, several senators from both parties indicated they would not support a second term.[30] [31] [32] [33] [34] [35] However, Bernanke was confirmed for a second term as Chairman on January 28, 2010, by a 70–30 vote of the full Senate,[36] historically the narrowest margin for any occupant of the position.[37] (For the roll-call vote, see Obama confirmations, 2010.) The Senate first voted 77–23 to end debate, Bernanke winning more than the 60 approval votes needed to overcome the possibility of a filibuster.[38] On a second vote to confirm, the 30 dissents came from 11 Democrats, 18 Republicans and one independent.[38]

Controversies as Federal Reserve Chairman

Bernanke has been subjected to criticism concerning the late-2000s financial crisis. According to The New York Times, Bernanke "has been attacked for failing to foresee the financial crisis, for bailing out Wall Street, and, most recently, for injecting an additional $600 billion into the banking system to give the slow recovery a boost."[39]

Merrill Lynch merger with Bank of America

In a letter to Congress from then-New York State Attorney General Andrew Cuomo dated April 23, 2009, Bernanke was mentioned along with former Treasury Secretary Henry Paulson in allegations of fraud concerning the acquisition of Merrill Lynch by Bank of America. The letter alleged that the extent of the losses at Merrill Lynch were not disclosed to Bank of America by Bernanke and Paulson. When Bank of America CEO Ken Lewis informed Paulson that Bank of America was exiting the merger by invoking the "Materially Adverse Change" (MAC) clause, Paulson immediately called Lewis to a meeting in Washington. At the meeting, which allegedly took place on December 21, 2008, Paulson told Lewis that he and the board would be replaced if they invoked the MAC clause and additionally not to reveal the extent of the losses to shareholders. Paulson stated to Cuomo's office that he was directed by Bernanke to threaten Lewis in this manner.[40] Congressional hearings into these allegations were conducted on June 25, 2009, with Bernanke testifying that he did not bully Ken Lewis. Under intense questioning by members of Congress, Bernanke said, "I never said anything about firing the board and the management [of Bank of America]." In further testimony, Bernanke said the Fed did nothing illegal or unethical in its efforts to convince Bank of America not to end the merger. Lewis told the panel that authorities expressed "strong views" but said he would not characterize their stance as improper.[41]

AIG bailout

According to a January 26, 2010, column in The Huffington Post, a whistleblower has disclosed documents providing troubling details' of Bernanke's role in the AIG bailout". Republican Senator Jim Bunning of Kentucky said on CNBC that he had seen documents which show Bernanke overruled recommendations from his staff in bailing out AIG. The columnist says this raises questions as to whether or not the decision to bail out AIG was necessary. Senators from both parties who support Bernanke say his actions averted worse problems and outweigh whatever responsibility he may have for the financial crisis.[42]

Economic views

He has given several lectures at the London School of Economics on monetary theory and policy and has written three textbooks on macroeconomics, and one on microeconomics. He was the Director of the Monetary Economics Program of the National Bureau of Economic Research and the editor of the American Economic Review. He is among the 50 most published economists in the world according to IDEAS/RePEc.

Bernanke is particularly interested in the economic and political causes of the Great Depression, on which he has published numerous academic journal articles. Before Bernanke's work, the dominant monetarist theory of the Great Depression was Milton Friedman's view that it had been largely caused by the Federal Reserve's having reduced the money supply. In a speech on Milton Friedman's ninetieth birthday (November 8, 2002), Bernanke said, "Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna [Schwartz, Friedman's coauthor]: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."[43] Bernanke has cited Milton Friedman and Anna Schwartz in his decision to lower interest rates to zero.[44] Anna Schwartz however is highly critical of Bernanke and wrote an opinion piece in the New York Times advising Obama against his reappointment to Chair of Federal Reserve. Bernanke focused less on the role of the Federal Reserve, and more on the role of private banks and financial institutions.[45] Bernanke found that the financial disruptions of 1930–33 reduced the efficiency of the credit allocation process; and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand, identifying an effect he called the financial accelerator. When faced with a mild downturn, banks are likely to significantly cut back lending and other risky ventures. This further hurts the economy, creating a vicious cycle and potentially turning a mild recession into a major depression.[46] Economist Brad DeLong, who had previously advocated his own theory for the Great Depression, notes that the current financial crisis has increased the pertinence of Bernanke's theory.[47]

In 2002, following coverage of concerns about deflation in the business news, Bernanke gave a speech about the topic.[48] In that speech, he mentioned that the government in a fiat money system owns the physical means of creating money. Control of the means of production for money implies that the government can always avoid deflation by simply issuing more money. He said "The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost."(He referred to a statement made by Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation.) Bernanke's critics have since referred to him as "Helicopter Ben" or to his "helicopter printing press." In a footnote to his speech, Bernanke noted that "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation."[48] For example, while Greenspan publicly supported President Clinton's deficit reduction plan and the Bush tax cuts, Bernanke, when questioned about taxation policy, said that it was none of his business, his exclusive remit being monetary policy, and said that fiscal policy and wider society related issues were what politicians were for and got elected for. But Bernanke has been identified by the Wall Street Journal and a close colleague as a "libertarian-Republican" in the mold of Alan Greenspan.[44]

In 2005 Bernanke coined the term saving glut, the idea, which does not take into account time preference, that a worldwide oversupply of savings finances the current account deficits of the United States and keeps interest rates low.[49]

As the recession began to deepen in 2007, many economists urged Bernanke (and the rest of the Federal Open Market Committee) to lower the federal funds rate below what it had done. For example, Larry Summers, later named Director of the White House's National Economic Council under President Obama, wrote in the Financial Times on November 26, 2007—in a column in which he argued that recession was likely—that "... maintaining demand must be the over-arching macro-economic priority. That means the Federal Reserve System has to get ahead of the curve and recognize—as the market already has—that levels of the Federal Funds rate that were neutral when the financial system was working normally are quite contractionary today."[50]

David Leonhardt of The New York Times wrote, on January 30, 2008, that "Dr. Bernanke's forecasts have been too sunny over the last six months. [On] the other hand, his forecast was a lot better than Wall Street's in mid-2006. Back then, he resisted calls for further interest rate increases because he thought the economy might be weakening."[51]

Statements on deficit reduction and reform of Social Security / Medicare

Bernanke favors reducing the U.S. budget deficit, particularly by reforming the Social Security and Medicare entitlement programs. During a speech delivered on April 7, 2010, he warned that the U.S. must soon develop a "credible" plan to address the pending funding crisis faced by "entitlement programs such as Social Security and Medicare" or "in the longer run we will have neither financial stability nor healthy economic growth."[52] [53] Bernanke said that formulation of such a plan would help the economy now, even if actual implementation of the plan might have to wait until the economic outlook improves. His remarks were probably intended for the federal government's executive and legislative branches, since entitlement reform is a fiscal exercise that will be accomplished by the Congress and the President rather than a monetary task falling within the implementation powers of the Federal Reserve. Bernanke also pointed out that deficit reduction will necessarily consist of either raising taxes, cutting entitlement payments and other government spending, or some combination of both.

Awards and honors

In media

Bernanke is portrayed by actor Paul Giamatti in the HBO film Too Big to Fail.


. Andrew B. Abel. Ben S.. Bernanke. Dean. Croushore. Dean Croushore. Macroeconomics. 6th. Addison–Wesley. 2007. 978-0-321-41554-7.

. Ben S.. Bernanke. Robert H. Frank. Principles of Macroeconomics. McGraw–Hill. 2007. 978-0-07-336265-6.

See also


Further reading

External links

Notes and References

  1. Bernanke's first name is Ben, not Benjamin; it is not an abbreviated name. (ref: "Big Ben", Slate, October 24, 2005) Bernanke's middle name is Shalom.
  2. See inogolo:pronunciation of Ben Bernanke.
  3. News: Fed Chief's Boyhood Home Is Sold After Foreclosure. The Wall Street Journal. Dow Jones & Company. 2009-02-14. A1. Phillips, Michael M..
  4. Wessel, David. In Fed We Trust: Ben Bernanke's War on the Great Panic (New York: Crown Business, 2009), p. 69.
  5. Web site: Federal Reserve Speech: Chairman Ben S. Bernanke At the presentation of the Order of the Palmetto, Dillon, South Carolina. Board of Governors of the Federal Reserve System. 2006-09-01. 2010-01-30.
  6. News: New Fed chief will face an economy with issues. Kirchhoff. Sue. 2006-01-31. USA Today. 2008-11-08.
  7. News: Person of the Year (2009). Time. 2009-12-16. 2010-04-26.
  8. Web site: The New York Times Store > The Times/Ellis Island Legacy Keepsake. 1942-02-15. 2010-01-30.
  9. Web site: The Times/Ellis Island Legacy Keepsake. 1921-06-30. 2010-01-30.
  10. Web site: The Times/Ellis Island Legacy Keepsake. 1921-06-30. 2010-01-30.
  11. Web site: The Times/Ellis Island Legacy Keepsake. 1921-06-30. 2010-01-30.
  12. Web site: FRB: Speech, Bernanke-Financial Access for Immigrants: The Case of Remittances-April 16, 2004. The Federal Reserve Board. 2004-04-16. 2010-01-30.
  13. Web site: 60 Minutes Video – 60 Minutes, 06.07.09. 2010-01-30.
  14. News: In First Crisis on the Job, Bernanke's About-Face Is Weighed. John M. Broder. The New York Times. August 20, 2007. 2008-03-15.
  15. Web site: Fed Nominee Bernanke Was Molded By Upbringing in Small-town South. The Daily Forward. 2005-11-18. 2010-01-30.
  16. Wessel, David. In Fed We Trust: Ben Bernanke's War on the Great Panic (New York: Crown Business, 2009), pp. 70–71.
  17. Wessel, David (2009), In Fed We Trust: Ben Bernanke's War on the Great Panic, New York: Crown Business, p. 70.
  18. News: Federal Reserve Chairman Ben Bernanke. Romero, Frances. March 16, 2009. January 28, 2010. Time.
  19. News: Bernanke is a student of Great Depression, Red Sox. Johnston, Danny. Associated Press. USA Today. October 24, 2005. January 28, 2010.
  20. News: Bernanke Unwrapped. White, Ben. The Washington Post. November 15, 2005. January 15, 2008.
  21. Ph.D.. Bernanke. Benjamin Shalom. 1979. May. Massachusetts Institute of Technology. Long-Term Commitments, Dynamic Optimization, and the Business Cycle. July 13, 2011.
  22. Grunwald, Michael (December 16, 2009), "Ben Bernanke", Time
  23. Web site: Deflation: Making Sure 'It' Doesn't Happen Here, Remarks by Governor Ben S. Bernanke Before the National Economists Club, Washington, D.C. November 21, 2002.
  24. Krugman, Paul R. (2009). The Return of Depression Economics and the Crisis of 2008. Norton & Company. p. 10.
  25. Andrews, Edmund L.; Leonhardt, David; Porter, Eduardo; Uchitelle, Louis (October 26, 2005), "At the Fed, an Unknown Became a Safe Choice", The New York Times, retrieved January 31, 2010
  26. Web site: Bernanke Biography. 2010-01-30.
  27. News: Fed Chief Calls His Remarks A Mistake. 2006-05-24. 2010-01-30. Nell. Henderson.
  28. News: Court Orders Fed to Disclose Emergency Bank Loans. Pittman. Mark. August 25, 2009. Bloomberg News. August 26, 2009.
  29. News: Hilsenrath. Jon. Calm in Crisis Won Fed Job. Elizabeth. Williamson. Jonathan. Weisman. The Wall Street Journal. August 26, 2009. January 30, 2010.
  30. Web site: McCain To Oppose Bernanke Reconfirmation. The Huffington Post. January 24, 2010 (updated March 26, 2010). July 15, 2011.
  31. Web site: Sloan. Steven. Senate Vote on Bernanke Confirmation Set for Thursday. 2010-01-30.
  32. News: Populist backlash puts Federal Reserve Chairman Ben Bernanke under siege. The Washington Post. January 23, 2010. January 30, 2010. Neil. Irwin. Lori. Montgomery.
  33. News: 2 Key Senators Oppose a Second Term for Bernanke. Chan, Sewell. The New York Times. January 22, 2010. January 22, 2010. A1.
  34. Web site: Release: Sanders Puts Hold on Bernanke. December 2, 2009. January 24, 2010.
  35. Web site: Senate Dems Not Sure They Can Get Enough Votes to Reconfirm Bernanke. January 21, 2010. ABC News. January 24, 2010.
  36. Web site: U.S. Senate Roll Call Vote. January 28, 2010. U.S. Senate. January 28, 2010.
  37. News: Irwin. Neil. Senate confirms Bernanke for second term as Federal Reserve chairman. The New York Times. January 28, 2010. January 28, 2010.
  38. News: Chan. Sewell. Bernanke wins a second term, but it's a tepid victory. Houston Chronicle. January 29, 2010. January 28, 2010.
  39. Chan, Sewell (December 11, 2010) "The Fed? Ron Paul's Not a Fan", The New York Times
  40. Web site: Andrew Cuomo letter to Congress, April 23, 2009. 2009-05-06. PDF.
  41. "Lawmakers hit out at Paulson over BofA-Merrill". Reuters. July 16, 2009
  42. Grim, Ryan (January 27, 2010), "Is Bernanke Hiding A Smoking Gun?", The Huffington Post
  43. FRB Speech: Remarks by Governor Ben S. Bernanke, At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois, November 8, 2002
  44. Web site: Penn Bullock from the December 2009 issue. Bernanke’s Philosopher — Reason Magazine. 2010-01-30.
  45. Bernanke, Ben S., "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," American Economic Review, 73 (June 1983), pp. 257–76.
  46. Web site: "The Financial Accelerator and the Credit Channel", The Credit Channel of Monetary Policy in the Twenty-first Century Conference, Federal Reserve Bank of Atlanta, Atlanta, Georgia (June 15, 2007). 2007-06-15. 2010-01-30.
  47. Brad DeLong. "Lecture 10: Depressions and Panics, 1840–1933" Economics 113 – American Economic History UC Berkeley
  48. Web site: Speech, Bernanke -Deflation- November 21, 2002. 2010-01-30.
  49. Web site: Governor Ben S. Bernanke, The Global Saving Glut and the U.S. Current Account Deficit. March 2005. 2009-06-05.
  50. Web site: Larry Summers in Financial Times.
  51. News: "Bernanke's Midterm Tests" by David Leonhardt, The New York Times, Jan. 30, 2008. 2008-01-30. 2010-04-26.
  52. Bernanke, Ben S., "Economic Challenges: Past, Present and Future (PDF version)" (see pages 13–14 of the speech transcript). Speech given on Apr. 7, 2010 to the Dallas Regional Chamber of Commerce in Dallas, Texas. Retrieved Apr. 15, 2010.
  53. Bernanke, Ben S., "Economic Challenges: Past, Present and Future (HTML version)" (see paragraphs 4, 5 and 6 in the "Economic Challenges" section at the end of the speech transcript). Speech given on Apr. 7, 2010 to the Dallas Regional Chamber of Commerce in Dallas, Texas. Retrieved Apr. 15, 2010.
  54. Web site: Book of Members, 1780–2010: Chapter B. American Academy of Arts and Sciences. June 24, 2011.
  55. Web site: Columbia Business School Annual Dinner. 2008-05-08.
  57. News: Michael Grunwald. Person of the Year 2009. 2009-12-16. 2010-01-30.