/BenBernanke_round4-1d076fd564384925a91192623ef10c03.png "Who Is Ben Bernanke? What Is He Important? 1")
Ben Bernanke was the chair of the board of governors of the U.S. Federal Reserve from 2006 to 2014. Bernanke took over the helm from Alan Greenspan on February 1, 2006, ending Greenspan’s 18-year management on the Fed.
A former Fed governor, Bernanke was chair of the U.S. President’s Council of Financial Advisors previous to being nominated as Greenspan’s successor in late 2005.
Key Takeaways
- Ben Bernanke is a former Federal Reserve chair, serving from 2006 to 2014.
- As Fed chair, Bernanke oversaw the central financial institution’s response to the 2008 monetary disaster and the Nice Recession.
- Bernanke succeeded Alan Greenspan and was changed by Janet Yellen.
- Bernake launched a number of methods, together with quantitative easing, to spice up the U.S. financial system throughout the 2008 recession.
- Critics argue that Bernake flooded the financial system with an excessive amount of cash, contributing to inflation and elevated debt.
Investopedia / Alison Czinkota
Early Life and Training
Born Benjamin Shalom Bernanke on December 13, 1953, he’s the son of a pharmacist and a schoolteacher and was raised in South Carolina. A high-achieving pupil, Bernanke accomplished his undergraduate diploma summa cum laude at Harvard College after which accomplished his Ph.D. at MIT in 1979.
He taught economics at Stanford after which at Princeton College, the place he chaired the division till 2002 when he left his tutorial work for public service. He formally left his submit at Princeton in 2005.
Notable Accomplishments
Bernanke was first nominated as chair of the Fed by President George W. Bush in 2005. He had been appointed to President Bush’s Council of Financial Advisors earlier the identical yr, which was broadly seen as a take a look at run for succeeding Greenspan as chair.
In 2010, President Barack Obama nominated him for a second time period as chair. He was succeeded by Janet Yellen as chair in 2014. Earlier than serving his two phrases as chair of the Federal Reserve, Bernanke was a member of the Federal Reserve’s Board of Governors from 2002 to 2005.
Financial Contributions
Ben Bernanke was instrumental in stimulating the U.S. financial system after the 2008 banking disaster that despatched the financial system right into a downward spiral. He took an aggressive and experimental strategy to revive confidence within the monetary system.
One of many a number of methods that the Fed utilized to curb the worldwide disaster was enacting a low-rate coverage to stabilize the financial system. Underneath the tutelage of Bernanke, the Fed slashed the benchmark rates of interest close to to zero. By lowering the federal funds charge, banks lend one another cash at a decrease value, and in flip, can provide low-interest charges on loans to shoppers and companies.
$16 trillion
The full internet price American households misplaced between 2007 and 2009 of the Nice Recession.
As circumstances worsened, Bernanke proposed a quantitative easing program. The quantitative easing scheme concerned the unconventional buy of Treasury bond securities and mortgage-backed securities (MBS) to extend the cash provide within the financial system. By buying these securities on a big scale, the Fed elevated the demand for them, which led to a rise within the costs. Since bond costs and rates of interest are inversely associated, rates of interest fell in response to the upper costs. The decrease rates of interest decreased the financing prices for enterprise investments, therefore enhancing a enterprise’ monetary place. By bolstering operations and actions, companies had been capable of create extra jobs, which contributed to a discount within the unemployment charge.
Bernake’s Bail Outs
Ben Bernanke additionally helped to curb the consequences of the quickly deteriorating financial circumstances by bailing out a number of troubled large monetary establishments. Whereas the Fed underwrote the choice to let Lehman Brothers fail, they bailed out corporations, similar to AIG Insurance coverage, because of the greater danger that the bailed-out corporations posed in the event that they went bankrupt.
Within the case of AIG, Bernanke believed that the corporate’s big legal responsibility was solely remoted in its monetary merchandise which concerned a whole bunch of billions of {dollars} in derivatives hypothesis. If the corporate misplaced out on its speculative place on these derivatives, it will not have ample funds to pay out or cowl its losses. For corporations like Merrill Lynch and Bear Stearns, the Federal Reserve incentivized Financial institution of America and JPMorgan to buy and take over each corporations by guaranteeing the unhealthy loans of the troubled banks.
Printed Works
In his 2015 e-book, The Braveness to Act, Bernanke wrote about his time as chair of the Federal Reserve and uncovered how shut the worldwide financial system got here to collapsing in 2008, stating that it will have executed so had the Federal Reserve and different businesses not taken excessive measures. President Barack Obama has additionally said that Bernanke’s actions prevented the monetary disaster from turning into as unhealthy because it may have been. Nonetheless, Bernanke has additionally been the topic of critics who declare he did not do sufficient to foresee the monetary disaster.
In 2013, Bernake launched The Federal Reserve and the Monetary Disaster, a compilation of his lectures in regards to the historical past of the Federal Reserve and the monetary disaster of 2008. It options his insights on the Fed’s actions, choices, and responses to occasions.
Two years later, he printed The Braveness to Act: A Memoir of a Disaster and Its Aftermath, chronicling his experiences because the chairman of the Federal Reserve Board and highlighting his strategies for saving the U.S. financial system from one other melancholy.
Legacy
Though Bernanke’s actions had been indelible to the restoration of the worldwide financial system, he confronted criticism for the approaches that he took to attain this restoration. Economists criticized his pumping a whole bunch of billions of {dollars} into the financial system by the bond-purchase program which doubtlessly elevated particular person and company debt, and led to inflation. Along with these economists, legislators additionally criticized his excessive measures and opposed his re-appointment as Federal Reserve Chair in 2010. President Barack Obama, nevertheless, reappointed him for a second time period.
As of April 2018, Ben Bernanke is at the moment serving as an economist on the Brookings Establishment, a nonprofit public group primarily based in Washington, DC, the place he offers recommendation on fiscal and financial insurance policies. He additionally serves as a senior advisor to Pimco and Citadel.
What Boards Does Ben Bernake Serve On?
After stepping down because the chair of the board of governors of the U.S. Federal Reserve, Ben Bernake served as a member of the Montgomery Township Board of Training in New Jersey for 2 years and is now an economist for the Brookings Establishment and advisor for monetary companies agency Citadel.
What Did Ben Bernake Do In the course of the Monetary Disaster?
To counter the consequences of the monetary disaster of 2008, Bernake employed a low-rate coverage—whereby charges had been decreased to virtually nothing—and a quantitative easing plan to extend the cash provide. Bernake additionally bailed out many massive, failing monetary establishments.
To What Financial College of Thought Does Ben Bernake Belong?
Ben Bernake belongs to the Milton Friedman and Anna Schwartz college of thought. Bernake subscribed to the precept that the Federal Reserve Board may scale back inflation and revitalize the financial system by rising the cash provide on the similar charge because the gross nationwide product (GNP).
The Backside Line
Ben Bernake, the previous two-term chair of the Federal Reserve, is essentially regarded for implementing methods that saved the U.S. financial system. His strategies, albeit considerably controversial, led to a rise in U.S. jobs, the bailout of well-known, established monetary establishments, and a sturdy financial system. His actions weren’t exempt from scrutiny, nevertheless, as there have been a number of critics who believed his actions had been extra detrimental than good. Regardless of various opinions, Bernake stays in excessive demand as an economist and advisor and is esteemed as one of the crucial influential Fed chairs in historical past.