Bernanke says Fed could have done more during crisis

ABU DHABI Tue Mar 4, 2014 10:53am EST

Former Federal Reserve Chairman Ben Bernanke (L) talks during Global Financial Markets Forum in Abu Dhabi March 4, 2014. REUTERS/Ahmed Jadallah

Former Federal Reserve Chairman Ben Bernanke (L) talks during Global Financial Markets Forum in Abu Dhabi March 4, 2014.

Credit: Reuters/Ahmed Jadallah

ABU DHABI (Reuters) - Former Federal Reserve Chairman Ben Bernanke said the U.S. central bank could have done more to fight the country's financial crisis and that he struggled to find the right way to communicate with markets.

"We could have done some things on the margin to mitigate somewhat the crisis," Bernanke, 60, said on Tuesday in his first public speaking engagement since he stepped down in January after eight years heading the Fed.

"Although we have been very aggressive, I think on the monetary policy front we could have been even more aggressive."

Bernanke said he could now speak more freely about the crisis than he could while at the Fed - "I can say whatever I want" - and in remarks to over 1,000 bankers and financial professionals in the capital of the United Arab Emirates, he made clear that he had regrets.

The United States became "overconfident", he said of the period before the September 2008 collapse of U.S. investment bank Lehman Brothers. That triggered a crash from which parts of the world, including the U.S. economy, have not fully recovered.

"This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises," Bernanke said.

As the Fed provided tens of billions of dollars of emergency aid to the U.S. financial system, Bernanke said he felt the central bank was in a "terrible" political situation because it could be accused of bailing out institutions unfairly.

He also said he found it hard to find the right way to communicate with investors when every word was closely scrutinized.

"That was actually very hard for me to get adjusted to that situation where your words have such effect. I came from the academic background and I was used to making hypothetical examples and ... I learned I can't do that because the markets do not understand hypotheticals."

He concluded that he should "try to simplify the message, but not simplify too much".

Ultimately, Bernanke said, he wished the U.S. economy could have recovered faster but "we did good in a very complicated situation and in a very complex political situation, and the result is what it is."

REMUNERATION

Bernanke received at least $250,000 for his appearance at the financial conference staged by National Bank of Abu Dhabi NBAD.AD, the UAE's largest bank, according to sources familiar the matter. NBAD did not announce the fee.

Because of Abu Dhabi's oil wealth, state-controlled NBAD prospered during the global crisis caused by Lehman's collapse, taking market share from hard-hit U.S. and European banks.

Bernanke's speaking fee is similar to one received by his predecessor Alan Greenspan for an Abu Dhabi speaking engagement in 2008, the sources said.

Greenspan embarked on a series of lucrative speeches after he stepped down, and Bernanke now appears to be doing the same. He is scheduled to speak at an event in South Africa on Wednesday and in Houston on Friday.

Another former heavyweight in U.S. economic policy, ex-Treasury Secretary Lawrence Summers, spoke at the Abu Dhabi event and criticized some aspects of Fed policy under Bernanke, although he acknowledged that policy needed to be expansionary.

Ultra-loose monetary policy, known as quantitative easing, has diminished returns in the economy and there is concern about the way the impact of low interest rates is being transmitted through the economy, Summers said.

Bernanke, looking relaxed in a grey suit and tie, said that after stepping down, he would write more about his experiences in the crisis to explain his side of the story. "For the future, I'm in a mode of reflection."

(Additional reporting by Regan Doherty; Writing by Andrew Torchia; Editing by Catherine Evans)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (3)
Rich_F wrote:
the book isn’t finished yet on the Fed’s actions during the crisis wait until the next crisis or when the dust finally settles on the current unsustainable Ponzi scheme than let’s talk if you’re still around Ben.

Mar 04, 2014 8:52am EST  --  Report as abuse
jrj906202 wrote:
Rich_F is right.This guy has done so much damage to the country and the results are coming.

Mar 04, 2014 11:38am EST  --  Report as abuse
“on the margin” he could have done more? That’s absurd. As trained macroeconomists know, this man is personally responsible for devastating the lives of tens of millions of Americans and causing the loss of millions of jobs, businesses, and homes.

The Federal Reserve he led provided, and kept providing, newly created money to help bail out Goldman Sachs and a few large financial institutions while totally ignoring the sad state of the real economy.

Basically, his lack of training in modern macroeconomics and lack of real world experience in business and commercial banking led him to pursue the monetary policies that the premier economists of eighty years ago, Hayek and Keynes, suggested for the UK of eighty years ago instead of the monetary policies today’s premier economist, G. Stigler and J. Lindauer, suggested for the economy of the US today.

Lindauer is right. We can quickly end the kind of economic malaise we are in without more government spending and regulations. All we need are competent Federal Reserve governors who flow money into the real economy instead of into non-bank financial institutions and overseas banks.

A good description of where Bernanke went wrong and what will pull us out of this mess can be found in “Inflation, Unemployment, and Government Deficits” or something similar from a real macro-economist with real world experience.

Mar 04, 2014 4:57pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.