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The Courage to Act: A Memoir of a Crisis and Its Aftermath
Ben S. Bernanke’s rise to chair of the Fed, the massive financial crisis, and the Fed’s bold and effective response.
In 2006, Ben S. Bernanke was appointed chair of the Federal Reserve, capping a meteoric trajectory from a rural South Carolina childhood to professorships at Stanford and Princeton, to public service in Washington’s halls of power. There would be no time to celebrate, however—the burst of the housing bubble in 2007 set off a domino effect that would bring the global financial system to the brink of meltdown.
In The Courage to Act, Ben Bernanke pulls back the curtain on the tireless and ultimately successful efforts to prevent a mass economic failure. Working with two U.S. presidents and two Treasury secretaries, Dr. Bernanke and his colleagues used every Fed capability, no matter how arcane, to keep the U.S. economy afloat. From his arrival in Washington in 2002 and his experiences before the crisis, to the intense days and weeks of the crisis itself, and through the Great Recession that followed, Dr. Bernanke gives readers an unequaled perspective on the American economy. This narrative will reveal for the first time how the creativity and decisiveness of a few key leaders prevented an economic collapse of unimaginable scale.
In 2006, Ben S. Bernanke was appointed chair of the Federal Reserve, capping a meteoric trajectory from a rural South Carolina childhood to professorships at Stanford and Princeton, to public service in Washington’s halls of power. There would be no time to celebrate, however—the burst of the housing bubble in 2007 set off a domino effect that would bring the global financial system to the brink of meltdown.
In The Courage to Act, Ben Bernanke pulls back the curtain on the tireless and ultimately successful efforts to prevent a mass economic failure. Working with two U.S. presidents and two Treasury secretaries, Dr. Bernanke and his colleagues used every Fed capability, no matter how arcane, to keep the U.S. economy afloat. From his arrival in Washington in 2002 and his experiences before the crisis, to the intense days and weeks of the crisis itself, and through the Great Recession that followed, Dr. Bernanke gives readers an unequaled perspective on the American economy. This narrative will reveal for the first time how the creativity and decisiveness of a few key leaders prevented an economic collapse of unimaginable scale.
624 pages, Hardcover
First published October 5, 2015
438 people are currently reading
4519 people want to read
About the author
Ben S. Bernanke
114 books200 followersBen S. Bernanke served as chairman of the Federal Reserve from 2006 to 2014. He was named Time magazine’s Person of the Year in 2009 and was a professor of economics at Princeton University prior to his career in public service.
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November 11, 2016
So the central banker who defined this recent era of QE finally gets around to writing about the crisis. Paulson’s book is gathering dust on my shelf. Geithner’s I gave a miss. Bernanke’s I had to read. I wanted to read his view on how the crisis came about.
We are not lacking for theories of how we ended up here.
1. A popular view is to blame it on free-market hubris. The names of Ronald Reagan, Francis Fukuyama and Bob Rubin come up a lot, with a dash of Sandy Weill and Larry Summers thrown in. According to this theory we have left “free markets” and deregulation run amuck and we need to go back to more government, back to the fifties when the government funded fundamental research, the era when the DARPA created the Internet and guided the world, rather than the world of companies chasing quarterly earnings and shareholder value above all else.
2. In a less “luddite” and probably more relevant version of this view, a Great Deformation has occurred, whereby the government has crept into every facet of our life, in partnership with some very powerful people who have ended up collecting the “economic rents” that come from “corporate equity withdrawal” enabled by the combination of (i) the perennial policy of tax deductibility on debt financing, (ii) perma-low interest rates thanks to Greenspan’s Fed and (iii) a regime whereby returns on capital get taxed less than earnings from work, most recently thanks to George W Bush. The people gets low rates to pay for its borrowed life; the government gets to run the show by targeting tax relief to the super-rich who use the proceeds of their wealth to buy more influence and live happily ever after. This theory also aims to explain how come the world is getting more unequal out here in the west and goes some way toward explaining the “serial bubbles” we seem to be going through.
3. The more fatalistic simply state that “the fundamental instability of capitalism is upward.” This theory (expounded by Minsky, Kindleberger and Koo for example) states that if I borrow money to compete with you in business, you are left with little choice other than to borrow money just like I did, otherwise I will out-compete you. This starts a cycle of more and more borrowing, which feeds into more and more goods and services becoming available because you and I build more capacity to provide more goods and services. This cycle of increased borrowing ends when we have gone through the three phases of borrowing (“hedged,” “speculative,” and finally “Ponzi”) and the whole thing ends in the form of a “balance sheet recession” whereby you and I and everybody else has over-borrowed and built all sorts of capacity (assets) that we must then spend years working out of, like Japan’s been doing for a couple decades. This is a more relaxed theory, in that it does not try to go into the detail. If you like Capitalism, it seems to say, get used to a bit of a depression every seventy-eighty years. We’re in one of those right now, do what you can to convince the politicians to take Keynesian measures and be patient, basically. Oh, and give it up on the monetary fixes, you’re pushing on a string, those who are in debt will not behave how you expect them to. Overindebted corporates won’t invest and overindebted consumers won’t spend.
4. Others say the crisis is borne of Globalization. As emerging economies are coming up the technology curve, the corporate world has unscrupulously chosen to re-locate production, and increasingly expertise in design, to the third world, destroying good jobs in the places we all live. So the past few years we’ve been living through a period when workers in the emerging market economies are outcompeting workers in our neck of the woods, leaving no choice to engineers here in the west other than to flip burgers or mow lawns. Moreover, the masters of the economies who are out-competing us are keeping a lid on their currency, thereby accumulating dollar reserves and creating a situation Bernanke himself dubbed the “the global glut of liquidity” which finds its way to western assets and creates bubbles.
5. Others, again, say the depression is only really starting. There’s a rather convincing 76 page book by professors Brynjolfson and McAfee that says all people who learned the three r’s (reading, writing and arithmetic) and think they’re cool had better make sure they are not using them repetitively, because if that’s the case there’s a little invention dating from 1982 called the PC that will wipe them out and it’s only really getting started. To travel agents and open-outrcy futures traders the list of over-educated burger-flippers is about to extend to radiologists and professors at lesser colleges and there’s no telling where it will end. Same way the 25% of Americans that worked in agriculture in year 1918 is now down to 2% and the 23% suffered a thing called “the Great Depression” in the twenties and thirties, basically. If you agree with this view, all the efforts expended on fiscal and monetary policy are merely serving to postpone the inevitable at the cost of distorting incentives. Difficult to disagree entirely, but many do! A competing theory, also very fancied, claims we’re in trouble for precisely the opposite reason: we’ve picked the low-hanging fruit of innovation (example: the washing machine, that freed women from the drudgery of daily work and allowed them to enter the workforce, the airplane that shrunk distances and the TV that lets information travel in real time) and now we’re ONLY benefitting from the computer.
Go figure, basically. And that’s just a quick selection; there are probably as many theories of the deeper causes of the financial crisis as there are people who have looked into this.
Seven years after the crisis, with the full benefit of hindsight and having run the world’s best economics department (that would be the Fed) what does Ben Bernanke have to say about all that? I was DYING TO KNOW.
It turns out he has nothing to say. Nada.
The Courage to Act is a dry account of the crisis days, a diary, with some autobiographical stuff thrown in.
The main problem with such a book, apart from the fact that it comes three years too late and adds little that we did not already know, is that Alan Blinder’s already written it three years ago, and actually did it better.
If you are looking for the ultimate in naïve, unquestioning of conventions, blow-by-blow account of the crisis, Blinder’s “After the Music Stopped” is shorter, better structured and better oriented toward the lay reader, and it’s replete with frequent explanations of the relevant economic and financial concepts that you won’t find in Bernanke’s book, much as “Courage to Act” is twice as long.
There are two things Blinder does not cover that you can find here, though:
1. The bits about Bernanke’s personal life. His parents’ background, his upbringing in Dillon, South Carolina, his 26th placing at the national spelling bee contest, the fact that he held the SAT record in his state (exact scores sadly not provided), the name of the guy who told him he could get into Harvard, his first date with this wife (a double date, if you care to know), and the hoops he had to jump through to get the job at the Fed that he claims he never aspired to. If you’re looking for the details of his interview with George W Bush or the color of his socks, this is the place to go.
2. The intra-agency politics. Fed versus FDIC, Fed and Treasury versus the OTS, if you have an interest in how sausage is made, this is a pretty good tour of the factory. You get a very complete account. When you read in the paper that “Bernanke is a consensus seeker” what it means in plain English is that he plans all his moves way in advance and if you are against him you’re going to find he’s been softening up your allies for months without you having noticed. Also, you get a very good picture of how intractable the politics were, and continue to be, with the various agencies mainly protecting their turf, actively preventing other agencies from keeping tabs on the banks they are supervising (example, the regulator for thrifts would not let the Fed inspect IndyMac or Countrywide or AIG) and Congress mainly keeping an eye on the election calendar.
This all makes Bernanke sound petty and mean, so I’m not describing it terribly well. When you read the book he does not come off at all as being mean. And you are left in no doubt regarding his good intentions. In fact, reading this book reinforced my belief that he meant well and in his heart of hearts was batting for the little guy.
On the other hand, the book also reinforced my feeling that he made a conscious decision to only pick fights he could win and planned ahead to make sure he only found himself in fights he could win.
I’m not necessarily saying he “made concessions to Wall Street that allowed him to get in a position to assist Main Street.” Perhaps he did and perhaps not, but there is no evidence of such a “pact with the devil” in these pages. My between-the-lines reading of the book is the following: Bernanke realised that he was an academic nerd, totally out of his depth swimming among the sharks of Wall Street. Rather than get swallowed whole, he made a conscious decision to stick to Hank Paulson (who was vested with Wall Street cred and Republican support) and Tim Geithner (of the Rubin / Summers / Weil / Clinton axis) and limited himself to employing technocratic, esoteric, geeky means, rather than getting the hammer out. Stuff like paying interest on reserves kept with the central bank, stuff like inflation targeting, stuff like increased communication and transparency, stuff like how to conduct monetary policy if we get ever stuck at the zero lower bound. In plain English, he made a decision to stick to his knitting. Which brings us to the fact that events did not allow him to do so.
Regarding those fateful events, I brought prejudice to my reading of this book. My list of preconceived notions about how the crisis unfolded is as follows:
· Hank Paulson, as a matter of ideology, was more than happy to move Fannie and Freddie into conservatorship
· Hank Paulson was relaxed about bringing market discipline to Bear and Lehman, as he held both institutions in low regard
· Perhaps (and this is contentious, I know) Hank Paulson considered the firm he once ran, Goldman Sachs, unfairly targeted by the market
· Nobody had any idea in how deep trouble AIG was, not even Goldman and certainly not AIG itself, to say nothing of the Fed
· Nobody had ever considered that money market funds could break the buck. They were on nobody’s radar.
· Bernanke went with whatever Hank Paulson thought about these issues and concentrated on “pure monetary policy” issues, like inflation targeting
More than anything else, I read this book with a view to revising my opinions and was looking forward to be proven wrong on some of these prejudices.
I’ve now finished it and I haven’t changed my mind. Bernanke hides behind the fact that he had limited powers.
The argument is made, not explicitly, not very forcefully, and not convincingly at all, that they got extremely lucky and were able to save AIG using the same limited means that had proven inadequate to save Lehman three days earlier.
“Challenge,” I say!
After reading the book, my view remains unchanged that they did not “break the glass” for Fannie and Freddie (quite the opposite, if anything) and they did not “break the glass” for Lehman, but when it became clear AIG would bring down everybody else they “broke the glass” for AIG a short three days later.
To be clear, only the mean-spirited would dare suggest the Paulson / Geithner / Bernanke triumvirate did not do their best to save the economy. The “j’accuse” element of all criticism against them is that they abandoned the principle of market discipline sometime between the Lehman failure and the AIG bailout.
It’s human. It’s precisely what Congress did when they first voted down TARP and then the stock market tanked and then they changed their mind and voted in favor. It’s what the Greek government did the other day between the referendum to leave the Euro and the acceptance of all the Europeans’ terms. But Bernanke has not used this book to admit it.
He does not even admit that his Fed was one of many agencies and regulators that had not done their homework.
There would have been no shame in saying “we had no idea, because we were not structured in a way that would have allowed us to gather the information”
There would have been no shame in saying “we underestimated the shadow banking system’s effect on the banks we were supervising”
There would have been no shame in saying “we were allowing free market ideology to blind us, but we became practical when things went terribly wrong”
There would have been no shame in saying “if we knew then what we know now we would have done things differently”
Instead, the book says “I regret nothing.”
Very poor.
Also, it’s petty. Fine, we know, Sheila Bair was difficult. It was instructive to see how much emphasis she put on protecting the FDIC, perhaps over the interest of the system as a whole. It was interesting to see that subsequently she was happy for her agency to be paid to guarantee all the banks’ debt, including the newly-christened former investment banks. But is there room in a book like this for innuendo like “she was Bob Dole’s protegee?” That’s low, no? On the flip side (and this is me being petty now) it is refreshing that Neel Kashkari’s name does not appear anywhere. Or is that because he now works at Pimco, where Bernanke consults? I don’t care, an account of the crisis where his name is missing is very refreshing.
Merits of the book?
Well, aside from the very complete understanding one obtains of how the relevant politics work (and thus the inevitable conclusion that Bernanke was an adept politician, first and foremost) pages 398 - 411 offer an extremely good understanding of how a financial crisis moves from the liquidity crisis phase to the solvency crisis phase. Additionally, pages 514 – 520 also explain very clearly the thinking behind various candidate policies the Fed considered, from negative rates all the way to nominal GDP targeting. Solid stuff. The concluding remarks about the prospects for the American economy on pages 575 - 578 were good too.
When people say we were lucky to have a student of the depression at the helm, I believe that’s two half-truths in one sentence. Neither was Bernanke truly at the helm (his courage to act did not stretch much past technocratic stuff), nor did he (for all his studying) explain how the crash of 1929 came about. But he has formulated a theory of how the lack of liquidity turned a financial disaster into an economic depression. Pages 398-411 take you through how this works and shed a lot of light on how Bernanke went about preventing the financial crisis of 2007-08 morphing into a depression. For those pages alone, the book is worth its purchase price.
Finally, on QE:
As a guy who had been predicting the demise of our rotten system and as a trader who had heavily bet against its survival, I was very upset with it when it happened. Rather than a piece of Paulson and Geithner style "financial fascism" whereby the rules of engagement are broken to maintain the status quo, the purchase of dirt-cheap Tresuries was a genuine case of a good trader "knowing his market" and making people on the other side like me look stupid. He gave us doomsayers a good spanking and he did it all using powers that were already fully vested in him. Oh, and he brought everybody's attention to the existence of a "safe asset," exactly as Minsky would have wanted him to do.
I’ve spent seven years thinking that, whatever people say, Bernanke is God for this reason alone: when he launched QE he understood that the economy was so deeply wounded, he was UNDERPAYING for all those Treasuries. He got the price right and the rest of the world got it wrong. Ergo, to the extent that QE amounted to the purchase of cheap assets, it was three birds with one stone:
1. It was a massive confidence booster (we’re not out of ammo after all!) and a confounder of people like Soros who were worried about who was left to buy T-Notes
2. It lowered rates for mortgages at a time when the politics of sick rantelliism was piling onto the vested interests of bondholders to make principal reduction an impossibility
3. It was guaranteed to make the Fed money, confounding the misguided critics who (in the middle of a depression!) were worried about losses at the central bank
That said, there’s no mention of #3 in the book. So now I’m less sure he understood how good he was. Maybe he was just executing the steps from the famous helicopter speech. Perhaps his trading brilliance was accidental, after all.
And of course we’re now left with a policy we can’t stop and a means for those who can still borrow (with enough distance, of course, for example via a company they control but has no recourse to them) to carry on getting exponentially richer, with the economy and the good companies increasingly becoming privately-owned, with a proliferation of monopolies and monopsonies, with the companies my pension fund can buy getting more indebted by the day etc. etc. But I guess that’s not his fault. He did what he had to do and then the politics took it over from him. Tough to argue you can put the QE genie back in the bottle. It’s going to have to die of natural causes.
Whatever the truth may be, none of that stuff is in the book.
Buy The Courage to Act if you want to find out what building the spelling bee contest was held in (the one where he came 26th) and what speech he gave there next time he visited. If you don’t care about that, get somebody to photocopy pages 398 to 411 for you and save.
We are not lacking for theories of how we ended up here.
1. A popular view is to blame it on free-market hubris. The names of Ronald Reagan, Francis Fukuyama and Bob Rubin come up a lot, with a dash of Sandy Weill and Larry Summers thrown in. According to this theory we have left “free markets” and deregulation run amuck and we need to go back to more government, back to the fifties when the government funded fundamental research, the era when the DARPA created the Internet and guided the world, rather than the world of companies chasing quarterly earnings and shareholder value above all else.
2. In a less “luddite” and probably more relevant version of this view, a Great Deformation has occurred, whereby the government has crept into every facet of our life, in partnership with some very powerful people who have ended up collecting the “economic rents” that come from “corporate equity withdrawal” enabled by the combination of (i) the perennial policy of tax deductibility on debt financing, (ii) perma-low interest rates thanks to Greenspan’s Fed and (iii) a regime whereby returns on capital get taxed less than earnings from work, most recently thanks to George W Bush. The people gets low rates to pay for its borrowed life; the government gets to run the show by targeting tax relief to the super-rich who use the proceeds of their wealth to buy more influence and live happily ever after. This theory also aims to explain how come the world is getting more unequal out here in the west and goes some way toward explaining the “serial bubbles” we seem to be going through.
3. The more fatalistic simply state that “the fundamental instability of capitalism is upward.” This theory (expounded by Minsky, Kindleberger and Koo for example) states that if I borrow money to compete with you in business, you are left with little choice other than to borrow money just like I did, otherwise I will out-compete you. This starts a cycle of more and more borrowing, which feeds into more and more goods and services becoming available because you and I build more capacity to provide more goods and services. This cycle of increased borrowing ends when we have gone through the three phases of borrowing (“hedged,” “speculative,” and finally “Ponzi”) and the whole thing ends in the form of a “balance sheet recession” whereby you and I and everybody else has over-borrowed and built all sorts of capacity (assets) that we must then spend years working out of, like Japan’s been doing for a couple decades. This is a more relaxed theory, in that it does not try to go into the detail. If you like Capitalism, it seems to say, get used to a bit of a depression every seventy-eighty years. We’re in one of those right now, do what you can to convince the politicians to take Keynesian measures and be patient, basically. Oh, and give it up on the monetary fixes, you’re pushing on a string, those who are in debt will not behave how you expect them to. Overindebted corporates won’t invest and overindebted consumers won’t spend.
4. Others say the crisis is borne of Globalization. As emerging economies are coming up the technology curve, the corporate world has unscrupulously chosen to re-locate production, and increasingly expertise in design, to the third world, destroying good jobs in the places we all live. So the past few years we’ve been living through a period when workers in the emerging market economies are outcompeting workers in our neck of the woods, leaving no choice to engineers here in the west other than to flip burgers or mow lawns. Moreover, the masters of the economies who are out-competing us are keeping a lid on their currency, thereby accumulating dollar reserves and creating a situation Bernanke himself dubbed the “the global glut of liquidity” which finds its way to western assets and creates bubbles.
5. Others, again, say the depression is only really starting. There’s a rather convincing 76 page book by professors Brynjolfson and McAfee that says all people who learned the three r’s (reading, writing and arithmetic) and think they’re cool had better make sure they are not using them repetitively, because if that’s the case there’s a little invention dating from 1982 called the PC that will wipe them out and it’s only really getting started. To travel agents and open-outrcy futures traders the list of over-educated burger-flippers is about to extend to radiologists and professors at lesser colleges and there’s no telling where it will end. Same way the 25% of Americans that worked in agriculture in year 1918 is now down to 2% and the 23% suffered a thing called “the Great Depression” in the twenties and thirties, basically. If you agree with this view, all the efforts expended on fiscal and monetary policy are merely serving to postpone the inevitable at the cost of distorting incentives. Difficult to disagree entirely, but many do! A competing theory, also very fancied, claims we’re in trouble for precisely the opposite reason: we’ve picked the low-hanging fruit of innovation (example: the washing machine, that freed women from the drudgery of daily work and allowed them to enter the workforce, the airplane that shrunk distances and the TV that lets information travel in real time) and now we’re ONLY benefitting from the computer.
Go figure, basically. And that’s just a quick selection; there are probably as many theories of the deeper causes of the financial crisis as there are people who have looked into this.
Seven years after the crisis, with the full benefit of hindsight and having run the world’s best economics department (that would be the Fed) what does Ben Bernanke have to say about all that? I was DYING TO KNOW.
It turns out he has nothing to say. Nada.
The Courage to Act is a dry account of the crisis days, a diary, with some autobiographical stuff thrown in.
The main problem with such a book, apart from the fact that it comes three years too late and adds little that we did not already know, is that Alan Blinder’s already written it three years ago, and actually did it better.
If you are looking for the ultimate in naïve, unquestioning of conventions, blow-by-blow account of the crisis, Blinder’s “After the Music Stopped” is shorter, better structured and better oriented toward the lay reader, and it’s replete with frequent explanations of the relevant economic and financial concepts that you won’t find in Bernanke’s book, much as “Courage to Act” is twice as long.
There are two things Blinder does not cover that you can find here, though:
1. The bits about Bernanke’s personal life. His parents’ background, his upbringing in Dillon, South Carolina, his 26th placing at the national spelling bee contest, the fact that he held the SAT record in his state (exact scores sadly not provided), the name of the guy who told him he could get into Harvard, his first date with this wife (a double date, if you care to know), and the hoops he had to jump through to get the job at the Fed that he claims he never aspired to. If you’re looking for the details of his interview with George W Bush or the color of his socks, this is the place to go.
2. The intra-agency politics. Fed versus FDIC, Fed and Treasury versus the OTS, if you have an interest in how sausage is made, this is a pretty good tour of the factory. You get a very complete account. When you read in the paper that “Bernanke is a consensus seeker” what it means in plain English is that he plans all his moves way in advance and if you are against him you’re going to find he’s been softening up your allies for months without you having noticed. Also, you get a very good picture of how intractable the politics were, and continue to be, with the various agencies mainly protecting their turf, actively preventing other agencies from keeping tabs on the banks they are supervising (example, the regulator for thrifts would not let the Fed inspect IndyMac or Countrywide or AIG) and Congress mainly keeping an eye on the election calendar.
This all makes Bernanke sound petty and mean, so I’m not describing it terribly well. When you read the book he does not come off at all as being mean. And you are left in no doubt regarding his good intentions. In fact, reading this book reinforced my belief that he meant well and in his heart of hearts was batting for the little guy.
On the other hand, the book also reinforced my feeling that he made a conscious decision to only pick fights he could win and planned ahead to make sure he only found himself in fights he could win.
I’m not necessarily saying he “made concessions to Wall Street that allowed him to get in a position to assist Main Street.” Perhaps he did and perhaps not, but there is no evidence of such a “pact with the devil” in these pages. My between-the-lines reading of the book is the following: Bernanke realised that he was an academic nerd, totally out of his depth swimming among the sharks of Wall Street. Rather than get swallowed whole, he made a conscious decision to stick to Hank Paulson (who was vested with Wall Street cred and Republican support) and Tim Geithner (of the Rubin / Summers / Weil / Clinton axis) and limited himself to employing technocratic, esoteric, geeky means, rather than getting the hammer out. Stuff like paying interest on reserves kept with the central bank, stuff like inflation targeting, stuff like increased communication and transparency, stuff like how to conduct monetary policy if we get ever stuck at the zero lower bound. In plain English, he made a decision to stick to his knitting. Which brings us to the fact that events did not allow him to do so.
Regarding those fateful events, I brought prejudice to my reading of this book. My list of preconceived notions about how the crisis unfolded is as follows:
· Hank Paulson, as a matter of ideology, was more than happy to move Fannie and Freddie into conservatorship
· Hank Paulson was relaxed about bringing market discipline to Bear and Lehman, as he held both institutions in low regard
· Perhaps (and this is contentious, I know) Hank Paulson considered the firm he once ran, Goldman Sachs, unfairly targeted by the market
· Nobody had any idea in how deep trouble AIG was, not even Goldman and certainly not AIG itself, to say nothing of the Fed
· Nobody had ever considered that money market funds could break the buck. They were on nobody’s radar.
· Bernanke went with whatever Hank Paulson thought about these issues and concentrated on “pure monetary policy” issues, like inflation targeting
More than anything else, I read this book with a view to revising my opinions and was looking forward to be proven wrong on some of these prejudices.
I’ve now finished it and I haven’t changed my mind. Bernanke hides behind the fact that he had limited powers.
The argument is made, not explicitly, not very forcefully, and not convincingly at all, that they got extremely lucky and were able to save AIG using the same limited means that had proven inadequate to save Lehman three days earlier.
“Challenge,” I say!
After reading the book, my view remains unchanged that they did not “break the glass” for Fannie and Freddie (quite the opposite, if anything) and they did not “break the glass” for Lehman, but when it became clear AIG would bring down everybody else they “broke the glass” for AIG a short three days later.
To be clear, only the mean-spirited would dare suggest the Paulson / Geithner / Bernanke triumvirate did not do their best to save the economy. The “j’accuse” element of all criticism against them is that they abandoned the principle of market discipline sometime between the Lehman failure and the AIG bailout.
It’s human. It’s precisely what Congress did when they first voted down TARP and then the stock market tanked and then they changed their mind and voted in favor. It’s what the Greek government did the other day between the referendum to leave the Euro and the acceptance of all the Europeans’ terms. But Bernanke has not used this book to admit it.
He does not even admit that his Fed was one of many agencies and regulators that had not done their homework.
There would have been no shame in saying “we had no idea, because we were not structured in a way that would have allowed us to gather the information”
There would have been no shame in saying “we underestimated the shadow banking system’s effect on the banks we were supervising”
There would have been no shame in saying “we were allowing free market ideology to blind us, but we became practical when things went terribly wrong”
There would have been no shame in saying “if we knew then what we know now we would have done things differently”
Instead, the book says “I regret nothing.”
Very poor.
Also, it’s petty. Fine, we know, Sheila Bair was difficult. It was instructive to see how much emphasis she put on protecting the FDIC, perhaps over the interest of the system as a whole. It was interesting to see that subsequently she was happy for her agency to be paid to guarantee all the banks’ debt, including the newly-christened former investment banks. But is there room in a book like this for innuendo like “she was Bob Dole’s protegee?” That’s low, no? On the flip side (and this is me being petty now) it is refreshing that Neel Kashkari’s name does not appear anywhere. Or is that because he now works at Pimco, where Bernanke consults? I don’t care, an account of the crisis where his name is missing is very refreshing.
Merits of the book?
Well, aside from the very complete understanding one obtains of how the relevant politics work (and thus the inevitable conclusion that Bernanke was an adept politician, first and foremost) pages 398 - 411 offer an extremely good understanding of how a financial crisis moves from the liquidity crisis phase to the solvency crisis phase. Additionally, pages 514 – 520 also explain very clearly the thinking behind various candidate policies the Fed considered, from negative rates all the way to nominal GDP targeting. Solid stuff. The concluding remarks about the prospects for the American economy on pages 575 - 578 were good too.
When people say we were lucky to have a student of the depression at the helm, I believe that’s two half-truths in one sentence. Neither was Bernanke truly at the helm (his courage to act did not stretch much past technocratic stuff), nor did he (for all his studying) explain how the crash of 1929 came about. But he has formulated a theory of how the lack of liquidity turned a financial disaster into an economic depression. Pages 398-411 take you through how this works and shed a lot of light on how Bernanke went about preventing the financial crisis of 2007-08 morphing into a depression. For those pages alone, the book is worth its purchase price.
Finally, on QE:
As a guy who had been predicting the demise of our rotten system and as a trader who had heavily bet against its survival, I was very upset with it when it happened. Rather than a piece of Paulson and Geithner style "financial fascism" whereby the rules of engagement are broken to maintain the status quo, the purchase of dirt-cheap Tresuries was a genuine case of a good trader "knowing his market" and making people on the other side like me look stupid. He gave us doomsayers a good spanking and he did it all using powers that were already fully vested in him. Oh, and he brought everybody's attention to the existence of a "safe asset," exactly as Minsky would have wanted him to do.
I’ve spent seven years thinking that, whatever people say, Bernanke is God for this reason alone: when he launched QE he understood that the economy was so deeply wounded, he was UNDERPAYING for all those Treasuries. He got the price right and the rest of the world got it wrong. Ergo, to the extent that QE amounted to the purchase of cheap assets, it was three birds with one stone:
1. It was a massive confidence booster (we’re not out of ammo after all!) and a confounder of people like Soros who were worried about who was left to buy T-Notes
2. It lowered rates for mortgages at a time when the politics of sick rantelliism was piling onto the vested interests of bondholders to make principal reduction an impossibility
3. It was guaranteed to make the Fed money, confounding the misguided critics who (in the middle of a depression!) were worried about losses at the central bank
That said, there’s no mention of #3 in the book. So now I’m less sure he understood how good he was. Maybe he was just executing the steps from the famous helicopter speech. Perhaps his trading brilliance was accidental, after all.
And of course we’re now left with a policy we can’t stop and a means for those who can still borrow (with enough distance, of course, for example via a company they control but has no recourse to them) to carry on getting exponentially richer, with the economy and the good companies increasingly becoming privately-owned, with a proliferation of monopolies and monopsonies, with the companies my pension fund can buy getting more indebted by the day etc. etc. But I guess that’s not his fault. He did what he had to do and then the politics took it over from him. Tough to argue you can put the QE genie back in the bottle. It’s going to have to die of natural causes.
Whatever the truth may be, none of that stuff is in the book.
Buy The Courage to Act if you want to find out what building the spelling bee contest was held in (the one where he came 26th) and what speech he gave there next time he visited. If you don’t care about that, get somebody to photocopy pages 398 to 411 for you and save.
not-to-read
October 22, 2015Presumably "The Courage to Muddle Through, Cover Your Backside and Look After Your Mates: A Memoir of Crony Capitalism and Its Successes" was too long a title to fit on the cover.
January 4, 2016
This is an in-depth look at the Great Recession of the early 2000's, and how the Feds and financial institutions averted or avoided economic disaster. Yes, it could have been a whole lot worse. Since Bernanke has a professor's background, this book is more insightful than Timothy Geithner's Stress Test, which sometimes reads like a suspense novel. Highly recommended for behind the scene information on politics and the complexity of keeping the economy in balance.
September 11, 2022
The Courage to Act by Ben Bernanke - Book Review
I've had a unique experience reading this book:
Despite it being 770+ pages long, I kept at it (After "Capital"). For some unknown reason, there was a magnetism about the honesty and narrative of this book that kept going.
As a finance enthusiast, I was/am spellbound by Central Bankers and what goes on in their minds to control their Countries' Finances - aka Destiny. As the self-designated "Chief Economist" of my mobile games, I often think of myself as a Central Banker deciding how the Economy will behave for the players in our games!
This book is a long, arduous read. I suggest reading the notes detailed below and then buying only IF you want more :)
Some of the amazing nuggets inside (Quotes) and my #dhandhekibaat (DKB) comments below:)
(If you think the quotes are spoilers, then be forewarned!)
"The accuracy of both central bank and private-sector forecasters has been extensively studied, and the results are not impressive. Unfortunately, beyond a quarter or two, the course of the economy is extremely hard to forecast."
DKB - Just like entrepreneurship and business!
"Advanced-economy central banks generally aimed for inflation of about 2 percent rather than zero"
"Once I asked an idle question at a briefing. By the end of the day, the staff had sent me a ten-page memo that answered the question under four different sets of assumptions and included a bibliography. After that I only asked questions when I really needed the answer."
DKB - Be respectful of your position and the impact it has on your juniors :)
"Decades ago, it was common for bankers to take deposits from people they nodded hello to at the grocery store and to make mortgage loans to people in neighborhoods within a thirty-minute drive of the bank."
"The government doesn’t allow sales of flammable children’s pajamas, for example, no matter how clear the warning label. Over time I would become more sympathetic to the behavioral view.....sometimes it may be better simply to ban practices that are not in consumers’ interest. "
DKB - The 'aam junta' is very gullible and vulnerable.
"Examples of predatory practices include bait-and-switch (borrowers receive a different type of loan than they were told to expect); equity stripping (lending to borrowers without enough income to repay, with the intent of ultimately seizing their homes); loan flipping (racking up loans and fees by encouraging repeated refinances); and packing (charging borrowers at mortgage origination for unnecessary services)."
DKB - 99.998% of Bankers I've met are all cheats. (Sorry in advance for hurting your sentiments)
"Famously, Bush liked to tease. Once, when I was making a presentation in the Oval Office, the president walked over to me and lifted my pants leg. With a professor’s finely honed sartorial sense, I was wearing tan socks with a dark suit.
“You know,” he said sternly, “this is the White House, we have standards.” I replied that I had bought the socks at the Gap, four pairs for ten dollars, and wasn’t he trying to promote conservative spending habits in the administration?
He nodded, deadpan, and I went on with the presentation.
The next day, I attended another Oval Office meeting. When the president entered, every member of the economic team in the room—plus Vice President Cheney—was wearing tan socks. The president tried to pretend that he didn’t notice, but before long he burst out laughing. Keith Hennessey masterminded the prank."
DKB: Choo Chweet :)
"My parents, like many owners of small businesses, took almost no time off."
“When the music stops . . . things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
DKB - IMMORTAL words for an Entrepreneur!
"Like my father, I grew distracted and unhappy when I could not usefully occupy my time."
"Société Générale (SocGen), France’s second-largest bank, announced that unauthorized futures trading by a single employee, later identified as Jérôme Kerviel, had caused a $7.2 billion pre-tax loss."
DKB - Be happy for the small mercies you have in your Business :)
"If you’ve got a squirt gun in your pocket, you may have to take it out. If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out,” he said. Sometimes market fears can be self-fulfilling, and a strong demonstration can avoid the worst outcomes. I was reminded of the military doctrine of “overwhelming force” as the way to prompt quick surrender and minimize casualties."
DKB - The power of posturing should never be underestimated!
"Borman, the former astronaut who became CEO of Eastern Airlines (which went bankrupt), put it nicely a quarter-century earlier: “Capitalism without bankruptcy is like Christianity without hell.”
DKB - In business, like in Love, all is fair :)
“You have a neighbor, who smokes in bed. . . . Suppose he sets fire to his house,” I would say later in an interview. “You might say to yourself . . . ‘I’m not gonna call the fire department. Let his house burn down. It’s fine with me.’ But then, of course, what if your house is made of wood? And it’s right next door to his house? What if the whole town is made of wood?”
DKB - "Responsibility" is a tag that's not easy to define!
"Wall Street Journal editor and columnist David Wessel once told me that if a reporter was doing a good job, the officials the reporter was covering felt relieved when he or she was reassigned."
"On those days, I would sometimes find solace reading a quote attributed to Abraham Lincoln... on a 3 x 5 card. I kept it next to my computer. “If I were to try to read, much less answer, all the attacks made on me, this shop might as well be closed for any other business..”
DKB: Don't care about the naysayers. Just keep ploughing.
“You never want a serious crisis to go to waste,” was Rahm’s motto.
DKB: Positivity in negativity! Always :)
Read all 450+ Book Notes here - https://bit.ly/dkb-courage-to-act
I've had a unique experience reading this book:
Despite it being 770+ pages long, I kept at it (After "Capital"). For some unknown reason, there was a magnetism about the honesty and narrative of this book that kept going.
As a finance enthusiast, I was/am spellbound by Central Bankers and what goes on in their minds to control their Countries' Finances - aka Destiny. As the self-designated "Chief Economist" of my mobile games, I often think of myself as a Central Banker deciding how the Economy will behave for the players in our games!
This book is a long, arduous read. I suggest reading the notes detailed below and then buying only IF you want more :)
Some of the amazing nuggets inside (Quotes) and my #dhandhekibaat (DKB) comments below:)
(If you think the quotes are spoilers, then be forewarned!)
"The accuracy of both central bank and private-sector forecasters has been extensively studied, and the results are not impressive. Unfortunately, beyond a quarter or two, the course of the economy is extremely hard to forecast."
DKB - Just like entrepreneurship and business!
"Advanced-economy central banks generally aimed for inflation of about 2 percent rather than zero"
"Once I asked an idle question at a briefing. By the end of the day, the staff had sent me a ten-page memo that answered the question under four different sets of assumptions and included a bibliography. After that I only asked questions when I really needed the answer."
DKB - Be respectful of your position and the impact it has on your juniors :)
"Decades ago, it was common for bankers to take deposits from people they nodded hello to at the grocery store and to make mortgage loans to people in neighborhoods within a thirty-minute drive of the bank."
"The government doesn’t allow sales of flammable children’s pajamas, for example, no matter how clear the warning label. Over time I would become more sympathetic to the behavioral view.....sometimes it may be better simply to ban practices that are not in consumers’ interest. "
DKB - The 'aam junta' is very gullible and vulnerable.
"Examples of predatory practices include bait-and-switch (borrowers receive a different type of loan than they were told to expect); equity stripping (lending to borrowers without enough income to repay, with the intent of ultimately seizing their homes); loan flipping (racking up loans and fees by encouraging repeated refinances); and packing (charging borrowers at mortgage origination for unnecessary services)."
DKB - 99.998% of Bankers I've met are all cheats. (Sorry in advance for hurting your sentiments)
"Famously, Bush liked to tease. Once, when I was making a presentation in the Oval Office, the president walked over to me and lifted my pants leg. With a professor’s finely honed sartorial sense, I was wearing tan socks with a dark suit.
“You know,” he said sternly, “this is the White House, we have standards.” I replied that I had bought the socks at the Gap, four pairs for ten dollars, and wasn’t he trying to promote conservative spending habits in the administration?
He nodded, deadpan, and I went on with the presentation.
The next day, I attended another Oval Office meeting. When the president entered, every member of the economic team in the room—plus Vice President Cheney—was wearing tan socks. The president tried to pretend that he didn’t notice, but before long he burst out laughing. Keith Hennessey masterminded the prank."
DKB: Choo Chweet :)
"My parents, like many owners of small businesses, took almost no time off."
“When the music stops . . . things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
DKB - IMMORTAL words for an Entrepreneur!
"Like my father, I grew distracted and unhappy when I could not usefully occupy my time."
"Société Générale (SocGen), France’s second-largest bank, announced that unauthorized futures trading by a single employee, later identified as Jérôme Kerviel, had caused a $7.2 billion pre-tax loss."
DKB - Be happy for the small mercies you have in your Business :)
"If you’ve got a squirt gun in your pocket, you may have to take it out. If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out,” he said. Sometimes market fears can be self-fulfilling, and a strong demonstration can avoid the worst outcomes. I was reminded of the military doctrine of “overwhelming force” as the way to prompt quick surrender and minimize casualties."
DKB - The power of posturing should never be underestimated!
"Borman, the former astronaut who became CEO of Eastern Airlines (which went bankrupt), put it nicely a quarter-century earlier: “Capitalism without bankruptcy is like Christianity without hell.”
DKB - In business, like in Love, all is fair :)
“You have a neighbor, who smokes in bed. . . . Suppose he sets fire to his house,” I would say later in an interview. “You might say to yourself . . . ‘I’m not gonna call the fire department. Let his house burn down. It’s fine with me.’ But then, of course, what if your house is made of wood? And it’s right next door to his house? What if the whole town is made of wood?”
DKB - "Responsibility" is a tag that's not easy to define!
"Wall Street Journal editor and columnist David Wessel once told me that if a reporter was doing a good job, the officials the reporter was covering felt relieved when he or she was reassigned."
"On those days, I would sometimes find solace reading a quote attributed to Abraham Lincoln... on a 3 x 5 card. I kept it next to my computer. “If I were to try to read, much less answer, all the attacks made on me, this shop might as well be closed for any other business..”
DKB: Don't care about the naysayers. Just keep ploughing.
“You never want a serious crisis to go to waste,” was Rahm’s motto.
DKB: Positivity in negativity! Always :)
Read all 450+ Book Notes here - https://bit.ly/dkb-courage-to-act
October 18, 2015
I enjoyed getting the inside view point and information about the recent financial crisis. Bernanke describes the struggle of policy makers at the Federal Reserve and Department of Treasury. Bernanke shows what it was like to develop a plan while the data is uncertain and the political environment is treacherous.
Bernanke tells of his early life growing up in a small town in South Carolina, and his academic studies of the Great Depression. Bernanke went on to be a Professor of Economics at Princeton University before he was chairman of the Federal Reserve. The author lays out the problem and how it came about; discussing the pros and cons of various solutions, then tells us how it was resolved. Bernanke made an important point that I have also heard from professional organization, businesses, and unions and so, it is that, many of the American workers are not trained/educated in the skills and professions we need today. We also have a shortage of teachers trained to teach in the needed skills. The author states this weakens the middle class and keeps more people in poverty; our economy works best at full employment.
It is frightening to realize how close we came to matching or exceeding the Great Depression again. The author also gives his perspectives about our economic future. Last year I read “Stress Test” by Timothy F. Geithner and “Too Big to Fail” by Andrew R. Sorkin; between the two books I think I have a better understanding of the “Great Recession” we are slowly making our way out of. I read this as an audiobook downloaded from Audible. The book is fairly long at about 23 hours. Grover Gardner did a good job narrating the book.
Bernanke tells of his early life growing up in a small town in South Carolina, and his academic studies of the Great Depression. Bernanke went on to be a Professor of Economics at Princeton University before he was chairman of the Federal Reserve. The author lays out the problem and how it came about; discussing the pros and cons of various solutions, then tells us how it was resolved. Bernanke made an important point that I have also heard from professional organization, businesses, and unions and so, it is that, many of the American workers are not trained/educated in the skills and professions we need today. We also have a shortage of teachers trained to teach in the needed skills. The author states this weakens the middle class and keeps more people in poverty; our economy works best at full employment.
It is frightening to realize how close we came to matching or exceeding the Great Depression again. The author also gives his perspectives about our economic future. Last year I read “Stress Test” by Timothy F. Geithner and “Too Big to Fail” by Andrew R. Sorkin; between the two books I think I have a better understanding of the “Great Recession” we are slowly making our way out of. I read this as an audiobook downloaded from Audible. The book is fairly long at about 23 hours. Grover Gardner did a good job narrating the book.
May 16, 2020
An interesting dive into the mind of the head of the most powerful central bank in the world during the financial crisis. The level of detail and insight in his account are impressive and rewarding for anyone who has an interest in economics (at a base level this could almost be taught as a class). Also interesting to see the nature of the politics at the Fed, whether it be intra-board or dealing with politicians. Ben does battle back at his critics a bit in this book, but that's not really what its about. Rather its a straight forward account of what his mindset and rationale were in upending the traditional rulebook for central bankers.
November 17, 2024
Not sure who I was trying to kid by reading this book. I think I thought it would be big short-esque? Obviously was not. Someone smarter than me may find it engaging but I did not. It did take me 14 months but against all odds I finished this but only because I read it every time I was awake in the middle of the night since it has a magical quality of instantly making me fall asleep. Tbh I also think bernencke failed at the sole goal of this book since it didn’t fully convince me bank bailouts meaningfully impacted the trajectory of the recession
April 23, 2025
Haven’t read this book since my EPQ in 6th form, but still holds up as an insightful and fascinating retelling of the Global Financial Crisis. Changes the way I think about monetary and fiscal policy, and genuinely educational. More detailed review and notes to follow.
January 22, 2016
One ironic effect of Ben Bernanke's success increasing transparency at the Federal Reserve is that it makes his book less than thrilling. Throughout his eight years as chairman, Bernanke made a real effort to explain to the public, through press conferences, Sixty Minutes interviews, and congressional hearings, what the Fed was doing and why it was doing it. Unlike his predecessor, Alan Greenspan, Bernanke trafficked in plain English and concrete explanations of complex monetary policies. We already know much of what went on during the crisis because Bernanke was kind enough to tell us.
The best parts of the book, therefore, describe Bernanke's life before the Fed. He describes how he worked his way from the son of a small town Southern pharmacist, waiting tables at the notorious South Carolina highway tourist trap South of the Border, up to Harvard undergrad. The small-town boy was shocked on his first day on campus in September 1971, when he was surrounded by rich kids smoking pot and blasting Jimi Hendrix. While others played, he cooked meals in his dorm room to earn money, without any hint of resentment. Bernanke finally decided to study economics after a class with future Reagan advisor Martin Feldstein, and after he realized economics allowed him to combine his love of history and math. Later, as an economic grad student at MIT, his advisor (and now Fed vice chair) Stan Fisher convinced him to read Milton Friedman and Anna Schwartz's Monetary History of the US. The same combination of history and numbers enraptured him, and shaped all his future work.
Bernanke's later time at the Fed took place in the spotlight, and therefore, as I mentioned, there is not much that is surprising here. The description of the crisis itself often seems like one continuous mergers and acquisition bonanza, with the Fed chairman playing the role of auctioneer. But this is also where some suspicions of the usually candid and straight-shooting author begin to emerge. As Bernanke describes his creation of innumerable Fed facilities, PDCF, TALF, TAF, TSLF, CPFF, he occasionally notes that he had to balance the new financial assets the Fed bought by selling other Fed securities. He continuously argues that this was necessary to avoid "los[ing] control of monetary policy," or control of the federal funds target interest rate. What he means is that, even into early 2009, long after the full scale of the financial crisis was clear, he was still worried about too MUCH monetary ease. In other words, Bernanke was working to funnel money to particular markets all while making sure that money didn't overly boost the entire economy. One has to wonder whether Bernanke is trying to slip one by the general reader, who wouldn't notice that Bernanke is admitting that he was continuously concerned about too much lending even during the catastrophe. Even after quantitative easing began in earnest in March 2009, Bernanke still occasionally worried that the Fed could "lose control" of monetary policy.
Of course, Bernanke was still much more activist than many other chairman would have been, and it's also clear that he was inhibited in his activist impulses by other members of the Federal Open Market Committee. Bernanke's desire to create a more collegial Federal Reserve meant that many "hawks" had to be placated before every move, and Bernanke subtly gestures at the constraints this put on policy. Even in his book, however, he's too collegial to dish dirt on anyone he disagreed with (though his negative feelings about Thomas Hoenig at the Fed, Sheila Barr at the FDIC, and the new Republican Congress do emerge). In the end, Bernanke may be a little reluctant to admit mistakes, but he is probably right that he did more than many others would be willing to do in his place. It may be fool-hardy to basically call yourself "courageous" in your memoir's title, but it may be deserved nonetheless.
The best parts of the book, therefore, describe Bernanke's life before the Fed. He describes how he worked his way from the son of a small town Southern pharmacist, waiting tables at the notorious South Carolina highway tourist trap South of the Border, up to Harvard undergrad. The small-town boy was shocked on his first day on campus in September 1971, when he was surrounded by rich kids smoking pot and blasting Jimi Hendrix. While others played, he cooked meals in his dorm room to earn money, without any hint of resentment. Bernanke finally decided to study economics after a class with future Reagan advisor Martin Feldstein, and after he realized economics allowed him to combine his love of history and math. Later, as an economic grad student at MIT, his advisor (and now Fed vice chair) Stan Fisher convinced him to read Milton Friedman and Anna Schwartz's Monetary History of the US. The same combination of history and numbers enraptured him, and shaped all his future work.
Bernanke's later time at the Fed took place in the spotlight, and therefore, as I mentioned, there is not much that is surprising here. The description of the crisis itself often seems like one continuous mergers and acquisition bonanza, with the Fed chairman playing the role of auctioneer. But this is also where some suspicions of the usually candid and straight-shooting author begin to emerge. As Bernanke describes his creation of innumerable Fed facilities, PDCF, TALF, TAF, TSLF, CPFF, he occasionally notes that he had to balance the new financial assets the Fed bought by selling other Fed securities. He continuously argues that this was necessary to avoid "los[ing] control of monetary policy," or control of the federal funds target interest rate. What he means is that, even into early 2009, long after the full scale of the financial crisis was clear, he was still worried about too MUCH monetary ease. In other words, Bernanke was working to funnel money to particular markets all while making sure that money didn't overly boost the entire economy. One has to wonder whether Bernanke is trying to slip one by the general reader, who wouldn't notice that Bernanke is admitting that he was continuously concerned about too much lending even during the catastrophe. Even after quantitative easing began in earnest in March 2009, Bernanke still occasionally worried that the Fed could "lose control" of monetary policy.
Of course, Bernanke was still much more activist than many other chairman would have been, and it's also clear that he was inhibited in his activist impulses by other members of the Federal Open Market Committee. Bernanke's desire to create a more collegial Federal Reserve meant that many "hawks" had to be placated before every move, and Bernanke subtly gestures at the constraints this put on policy. Even in his book, however, he's too collegial to dish dirt on anyone he disagreed with (though his negative feelings about Thomas Hoenig at the Fed, Sheila Barr at the FDIC, and the new Republican Congress do emerge). In the end, Bernanke may be a little reluctant to admit mistakes, but he is probably right that he did more than many others would be willing to do in his place. It may be fool-hardy to basically call yourself "courageous" in your memoir's title, but it may be deserved nonetheless.
January 2, 2016
The man who saved America from a Depression
This book is a seminar on how the modern financial system works, fails and most importantly how to rescue it. We are lucky as a nation that the man at the head of Federal Reserve was a scholar expert in the failures that led to the great 1930' s Depression . All banking systems suffer from one great weakness. They borrow short and lend long. If you do not understand that simple sentence then you need to read this book. Also our financial system exists in a web of laws enacted over time by congressional committees which requires enlisting the cooperation of both politicians and bureaucrats in order respond in real time to crises. This ability alone shows Mr. Bernanke to be a singularly important person. I would support that many in the current era of hyped up over the top rhetoric will find d this book to be too quite, thoughtful and scholarly. However it is full of thought provoking observations and criticisms. Mr Bernanke has no problem describing the shortfalls in our financial system and suggesting alternatives. Just do not expect him to be screaming "We all are all going to die". Lastly I can best describe the critical comments posted on Amazon metaphorically as blaming the fireman for the fire he just put out. The criticisms by and large do not show any attempt to come to grips with the modern financial system's faults and strong points. As a retired CPA I would highly recommend this book to anyone who seriously is concerned about managing their own money.
This book is a seminar on how the modern financial system works, fails and most importantly how to rescue it. We are lucky as a nation that the man at the head of Federal Reserve was a scholar expert in the failures that led to the great 1930' s Depression . All banking systems suffer from one great weakness. They borrow short and lend long. If you do not understand that simple sentence then you need to read this book. Also our financial system exists in a web of laws enacted over time by congressional committees which requires enlisting the cooperation of both politicians and bureaucrats in order respond in real time to crises. This ability alone shows Mr. Bernanke to be a singularly important person. I would support that many in the current era of hyped up over the top rhetoric will find d this book to be too quite, thoughtful and scholarly. However it is full of thought provoking observations and criticisms. Mr Bernanke has no problem describing the shortfalls in our financial system and suggesting alternatives. Just do not expect him to be screaming "We all are all going to die". Lastly I can best describe the critical comments posted on Amazon metaphorically as blaming the fireman for the fire he just put out. The criticisms by and large do not show any attempt to come to grips with the modern financial system's faults and strong points. As a retired CPA I would highly recommend this book to anyone who seriously is concerned about managing their own money.
January 1, 2019
As a financial professional, I find it is often difficult to explain the nature of our economy and the interaction of the various components, measurements, effects and actions but Bernanke does an excellent job in this book related to the financial crunch of 2009 and onward. While he disclaims political skills he does a masterful job handling the players in this drama and there are so many you need a scorecard. Still, the mix of the story of how the Feds forestalled a greater collapse and enhanced the recovery makes for interesting reading. I enjoyed the fact that as Federal Reserve Chairman he, as a student of the Great Depression, was fighting to make sure it did not happen again. Wondering why they let Lehman Brothers fail while saving Bear Sterns and AIG? Good insight into those issues. Also amazing how much profit the government made during this process despite the naysayers who felt they were headed down the wrong path. Some interesting autobiographical material as well. Good book with which to wind up the year. I may have only finished 3 of the 6 biographies I wanted to tackle - they are all long and involved - but hope to polish the rest off in 2019.
March 30, 2016
Ben Bernanke's first-hand account of his time as Chairman of the Federal Reserve--at the height of one of the most serious economic crises in U. S. history--is not just an important read for anyone who's interested in the Fed, finance, or the intersection of politics and economics. It's also fascinating and well written, with the sort of dry, self-deprecating humor that I love. Though at times the details of quantitative easing are a bit of a slog, for the most part The Courage to Act is both erudite and enlightening, the sort of book that would be useful to those who have read a lot on the subject, as well as others who might be new to it. Bernanke's abilities as a teacher are displayed to good effect here.
December 1, 2016
I started reading this before the election, and it was painful to continue of once it became apparent that men and women like him would not be assuming the responsibilities of office for the next four years. Bernanke is not a great writer, but his Dad-like qualities (the sense of responsibility, the eagerness to focus on substance, his awkward efforts to present "human interest" elements, etc.) are endearing. His greatest professional strengths are his willingness to focus on the lessons of prior crises rather than theory/dogma, and his embrace of the technocratic nature of his position. There will always be those who find reason to criticize people like Bernanke, but so very many of the alternatives look utterly disastrous to me.
November 11, 2015
This was a slog and if you've been paying attention to all of the other books about the financial crisis, there aren't any new or salacious details here that have not been revealed. Yet it is a must-read. It's important to understand how Bernanke views the Fed's job and all of the unprecedented actions the fed engaged in. I found it hard to put down even though it was not that smooth of a read.
May 25, 2019
This audible book published in 2015 is basically a memoir of the eight years in which Ben Bernanke served as the head of the federal reserve. It was a pretty significant eight years because it included the major economic drama of the 2007 through 2009 economic crash. Sometimes it is thought that you have to get a little distance from history before you can critically examine and understand what happened. This book doesn’t have that distance and of course the author is a person who was at the very pinnacle of the decision making for that period of economic crisis. As people sometimes like to say every story has two sides. This is the version of one person.
When I decided to listen to this particular book I was hoping to learn a little bit about the person who was behind all the headlines. I would have to say that about 10 or 15% of the book helped with that goal. At the very beginning of the book I learned that Ben is a Jew who grew up in a household that was kosher In a segregated town in South Carolina and that he was the high school valedictorian who went on to school at Harvard and MIT. That is all pretty interesting but there is not very much about him personally in the rest of the book. You have to read between the lines a little bit to understand where he might stand politically. He was appointed by President Bush and re-appointed by President Obama. In a world of changing politics where he mostly disparaged the right and left extremes he characterizes himself as a moderate independent. Of course his job at the Fed was to try to be non-partisan.
Most of the book is about pretty complicated economic manipulation as a part of a bureaucracy that is very well established but often somewhat invisible. Bernanke’s predecessor was Alan Greenspan, a pretty tough act to follow but it seems that he did that fairly well. One of the things that he would say that he did during his eight years was to increase the transparency of the fed. He had press conferences which was relatively new. And he went on television for interviews on 60 minutes twice. That’s twice in eight years. Way to go Ben!
The Fed is about buying and selling a variety of financial products as well as loaning money. But the Fed does these things At an astronomical level of dollars. I think during this period the Fed had a balance sheet of 4+ trillion dollars. The way you might be most familiar with the fed through most of recent history is the process of how they release information about what they are doing or what they might do or what they are thinking about doing. They have meetings where they spend a very long time talking about which word to use or The content of one sentence in a press release. And after they have their say commentators spend the next week debating what it is they might have meant. Mr. Bernanke shares this kind of obvious information rather glibly. With a straight face. Clearly the Fed takes itself very seriously! They may well be very justified in having this kind of an attitude. Maybe in private the people on the Fed make jokes about walking on water etc.
I would give this book 2 1/2 stars mostly because I think the level of complexity due to the economics makes it slightly unapproachable. It fills in making things understandable to the average person. It did give me the feeling of a lot of pretty smart people debating slightly obscure matters and then saying “let’s give this a try and see what happens for the next few days and then maybe will have to do a little more tinkering.” And of course this is a pretty male-dominated place. Oh yes there are a few women and Janet Yellen did come out on top at the end of the book.
The interactions between the fed which is a non-partisan independent agency and the treasury department which is all about the president and the Congress is somewhat interesting. Bernanke’s story is that he got very little help from the Republicans in trying to do what the Fed wanted to do. He does name some names in telling that part of the story. But the Fed is a pretty tight ship and trying to maintain an appearance of mostly unanimous solidarity. Members are Obviously on a pretty short leash about what they say between meetings.
When I decided to listen to this particular book I was hoping to learn a little bit about the person who was behind all the headlines. I would have to say that about 10 or 15% of the book helped with that goal. At the very beginning of the book I learned that Ben is a Jew who grew up in a household that was kosher In a segregated town in South Carolina and that he was the high school valedictorian who went on to school at Harvard and MIT. That is all pretty interesting but there is not very much about him personally in the rest of the book. You have to read between the lines a little bit to understand where he might stand politically. He was appointed by President Bush and re-appointed by President Obama. In a world of changing politics where he mostly disparaged the right and left extremes he characterizes himself as a moderate independent. Of course his job at the Fed was to try to be non-partisan.
Most of the book is about pretty complicated economic manipulation as a part of a bureaucracy that is very well established but often somewhat invisible. Bernanke’s predecessor was Alan Greenspan, a pretty tough act to follow but it seems that he did that fairly well. One of the things that he would say that he did during his eight years was to increase the transparency of the fed. He had press conferences which was relatively new. And he went on television for interviews on 60 minutes twice. That’s twice in eight years. Way to go Ben!
The Fed is about buying and selling a variety of financial products as well as loaning money. But the Fed does these things At an astronomical level of dollars. I think during this period the Fed had a balance sheet of 4+ trillion dollars. The way you might be most familiar with the fed through most of recent history is the process of how they release information about what they are doing or what they might do or what they are thinking about doing. They have meetings where they spend a very long time talking about which word to use or The content of one sentence in a press release. And after they have their say commentators spend the next week debating what it is they might have meant. Mr. Bernanke shares this kind of obvious information rather glibly. With a straight face. Clearly the Fed takes itself very seriously! They may well be very justified in having this kind of an attitude. Maybe in private the people on the Fed make jokes about walking on water etc.
I would give this book 2 1/2 stars mostly because I think the level of complexity due to the economics makes it slightly unapproachable. It fills in making things understandable to the average person. It did give me the feeling of a lot of pretty smart people debating slightly obscure matters and then saying “let’s give this a try and see what happens for the next few days and then maybe will have to do a little more tinkering.” And of course this is a pretty male-dominated place. Oh yes there are a few women and Janet Yellen did come out on top at the end of the book.
The interactions between the fed which is a non-partisan independent agency and the treasury department which is all about the president and the Congress is somewhat interesting. Bernanke’s story is that he got very little help from the Republicans in trying to do what the Fed wanted to do. He does name some names in telling that part of the story. But the Fed is a pretty tight ship and trying to maintain an appearance of mostly unanimous solidarity. Members are Obviously on a pretty short leash about what they say between meetings.
March 2, 2021
The credit crisis will always be memorable to me, as I embarked my career in the financial services during that period. Ben Bernanke along with Hank Paulson and Tim Geithner were the chief architects to helped the United States to navigate through the greatest financial crisis since the Great Depression.
Ben Bernanke’s memoir provides a smorgasbord of information for anyone looking to get a better understanding of the financial crisis and the steps taken by the federal reserve to stimulate growth. The book has no shortage of references of government programs that were aimed at stopping the crisis—TARP, HARP, HAMP, Quantitative Easings (QE1,2 and 3), Operation Twist, among them. The memoir also provides a highly readable account that adds a sorely missed perspective to the growing pile of post-crisis postmortems i.e., regulatory framework.
The Federal Reserve was chastised by both aisles of the political spectrum and media, which further fueled the fire and characterized financial firms as benighted entities and its executives as bêtes noires of this generation. However, it’s ironic that nobody complained as the securitization model which helped pour world’s saving into the United States and drove the mortgage costs down so more people can live the “American Dream”. In my opinion greed is not limited to Wall Street, it is as embedded in the human psyche as the boom and bust cycle in a capitalistic model and it was the greed on all fronts - consumers, brokers, rating agencies and more importantly congress which led to the crisis. As long as homo-sapiens remain at the top of the food chain in this world, there will always be another crisis. As Mark Twain once said “History doesn’t repeat itself, but it often rhymes.”
Under Bernanke’s leadership, federal reserve embraced principles set forth by Walter Bagehot and truly became the lender of last resort and may have created another bubble with some of the policies. While 2020 was truly an annus horribilis year with respect to the health crisis, lending facilities which were originally created during the credit crisis helped alleviate the credit crunch in the financial markets during the covid-19 capital markets meltdown. Pardon me for my predilections but I also appreciate Ben Bernanke’s view as a moderate who believes in market forces but also thinks that Fed has a constructive role to play. While the United States was able to get out of the crisis in a better shape than its peer countries, but the tight fiscal policies slowed the recovery; further proving the point that monetary and fiscal policies have to complement each other. Additionally , this book also touches on Euro Debt Crisis, which had its origins to the credit crisis but was further exacerbated due to a delayed monetary response and fiscal austerity.
I highly recommend this book to anyone looking to gain a better perspective of the credit crisis, federal reserve’s lending programs, and quantitative easing.
Ben Bernanke’s memoir provides a smorgasbord of information for anyone looking to get a better understanding of the financial crisis and the steps taken by the federal reserve to stimulate growth. The book has no shortage of references of government programs that were aimed at stopping the crisis—TARP, HARP, HAMP, Quantitative Easings (QE1,2 and 3), Operation Twist, among them. The memoir also provides a highly readable account that adds a sorely missed perspective to the growing pile of post-crisis postmortems i.e., regulatory framework.
The Federal Reserve was chastised by both aisles of the political spectrum and media, which further fueled the fire and characterized financial firms as benighted entities and its executives as bêtes noires of this generation. However, it’s ironic that nobody complained as the securitization model which helped pour world’s saving into the United States and drove the mortgage costs down so more people can live the “American Dream”. In my opinion greed is not limited to Wall Street, it is as embedded in the human psyche as the boom and bust cycle in a capitalistic model and it was the greed on all fronts - consumers, brokers, rating agencies and more importantly congress which led to the crisis. As long as homo-sapiens remain at the top of the food chain in this world, there will always be another crisis. As Mark Twain once said “History doesn’t repeat itself, but it often rhymes.”
Under Bernanke’s leadership, federal reserve embraced principles set forth by Walter Bagehot and truly became the lender of last resort and may have created another bubble with some of the policies. While 2020 was truly an annus horribilis year with respect to the health crisis, lending facilities which were originally created during the credit crisis helped alleviate the credit crunch in the financial markets during the covid-19 capital markets meltdown. Pardon me for my predilections but I also appreciate Ben Bernanke’s view as a moderate who believes in market forces but also thinks that Fed has a constructive role to play. While the United States was able to get out of the crisis in a better shape than its peer countries, but the tight fiscal policies slowed the recovery; further proving the point that monetary and fiscal policies have to complement each other. Additionally , this book also touches on Euro Debt Crisis, which had its origins to the credit crisis but was further exacerbated due to a delayed monetary response and fiscal austerity.
I highly recommend this book to anyone looking to gain a better perspective of the credit crisis, federal reserve’s lending programs, and quantitative easing.
July 7, 2022
This was a tough read for me. It reads like a transcription of his notes from various FED mtgs. However, there were some good morsels thrown in from time to time, which was exciting coming from a non-partisan insider who was as close to the action as anyone & w/o any real political lean to slant his perspective. I think of this book as a chocolate muffin where the muffin isn’t very good but the chocolate is from a beautiful chocolate river in Switzerland. You get treated with a nice chocolate morsel every other bite or that makes you say YUM but then you have to slog through a chocolate-less muffin bite and you say hmm this kinda stinks. Some good morsels (SPOILER ALERT)
-> His insights on working with George W Bush, and Bush’s considerable intelligence (per Bernanke) that contrasted with his public image
->While working with Obama, commentary regarding what an adept politician Obama was. Bernanke didn’t seem to always enjoy Obama trying to shape the political message, but overall seemed to have a lot of respect for him
-> Bernanke ended as FED chairman in 2014, pre Trump era, but his commentary at the end on how much more partisan politics became during his tenure was ominous. My favorite anecdote was of the senator (nameless in the book) who publicly blasted him in front of the TV cameras then privately apologized to Bernanke for having to give such a stupid sound bite “otherwise the masses will vote me out”. Bernanke admitted to having a very nuanced, detailed discussion around policy proposals with the senator, yet the senator gave a sound-bite that reflect a gross mis-interpretation of the policy
Unless you are a FED HEAD, I’d probably steer clear of this one
-> His insights on working with George W Bush, and Bush’s considerable intelligence (per Bernanke) that contrasted with his public image
->While working with Obama, commentary regarding what an adept politician Obama was. Bernanke didn’t seem to always enjoy Obama trying to shape the political message, but overall seemed to have a lot of respect for him
-> Bernanke ended as FED chairman in 2014, pre Trump era, but his commentary at the end on how much more partisan politics became during his tenure was ominous. My favorite anecdote was of the senator (nameless in the book) who publicly blasted him in front of the TV cameras then privately apologized to Bernanke for having to give such a stupid sound bite “otherwise the masses will vote me out”. Bernanke admitted to having a very nuanced, detailed discussion around policy proposals with the senator, yet the senator gave a sound-bite that reflect a gross mis-interpretation of the policy
Unless you are a FED HEAD, I’d probably steer clear of this one
April 18, 2021
The most detailed blow by blow account of the crisis ive read so far. Most other writers dont actually explain what repo markets are or how commercial paper works, which makes it hard to understand why the crisis actually occurred. Bernanke does explain all the relevant background. Since he's an econ professor, I wish he had given more background into the 80/90s economic policies that laid the groundwork for the crisis instead of the super detailed coverage of which FOMC board members disagreed with the wording on this or that particular statement.
A VERY in depth analysis of how the fed makes policy written by one of its most important policy makers. Anyone who's just interested in why the crisis occurred and what steps were taken to stop it from destroying the US economy can probably skip large portions of the book. A good first book for anyone interested in how fed policy is made.
A VERY in depth analysis of how the fed makes policy written by one of its most important policy makers. Anyone who's just interested in why the crisis occurred and what steps were taken to stop it from destroying the US economy can probably skip large portions of the book. A good first book for anyone interested in how fed policy is made.
November 27, 2025
El coraje de actuar es, sin duda, una lectura esencial para cualquiera que quiera entender la Gran Recesión de 2008 desde la perspectiva de quien tenía las manos en la palanca de la economía mundial.
Lo mejor del libro es el equilibrio que logra Bernanke. Ofrece una narrativa sólida que humaniza la toma de decisiones bajo una presión extrema, alejándose de la frialdad que a veces se asocia a la banca central. Pero donde realmente brilla es en los aspectos técnicos. Bernanke no simplifica en exceso; explica el funcionamiento de la Reserva Federal, la liquidez y las herramientas no convencionales.
Sin embargo, me quedo con las ganas de darle las 5 estrellas. El libro peca de ser excesivamente repetitivo. En su afán por ser meticuloso y justificar cada movimiento histórico, el autor vuelve sobre los mismos argumentos y explicaciones más veces de las necesarias, lo que hace que la lectura se sienta pesada en ciertos tramos.
Lo mejor del libro es el equilibrio que logra Bernanke. Ofrece una narrativa sólida que humaniza la toma de decisiones bajo una presión extrema, alejándose de la frialdad que a veces se asocia a la banca central. Pero donde realmente brilla es en los aspectos técnicos. Bernanke no simplifica en exceso; explica el funcionamiento de la Reserva Federal, la liquidez y las herramientas no convencionales.
Sin embargo, me quedo con las ganas de darle las 5 estrellas. El libro peca de ser excesivamente repetitivo. En su afán por ser meticuloso y justificar cada movimiento histórico, el autor vuelve sobre los mismos argumentos y explicaciones más veces de las necesarias, lo que hace que la lectura se sienta pesada en ciertos tramos.
August 3, 2024
Bernanke provides a good book on his growing up, academic work, and times in the Bush White House and Federal Reserve. While I disagree with much of his actions during his term as Fed chairman, especially bailing out banks and providing too much money in the economy, Bernanke made strong arguments for his actions and those in government during the Great Financial Crisis. Unfortunately, these measure made precedence for even worse monetary actions during the Great Lockdown Recession. I have learned much from Bernanke in his academic and government work and appreciate this book. Check it out.
April 26, 2017
You're my boy, Ben
September 3, 2017
Definitely not an easy read but very thoughtful and insightful.
May 21, 2019
This book has the feel of a macroeconomics textbook in story form
August 28, 2019
Good, interesting. An autobiography of Bernanke during his time as the Fed chairman. It gave an interesting internal perspective on the 2008 financial crisis
May 16, 2022
Thick Thick Book. By the time, I reached the end of the book, I forgot what I read in the beginning.
A few things stuck though:
- Monetary policy is not enough, you need congressional government policy to educate people, train them.
- They did not deliberately let Lehman Brother fail, they didn't have the tools to save them.
A few things stuck though:
- Monetary policy is not enough, you need congressional government policy to educate people, train them.
- They did not deliberately let Lehman Brother fail, they didn't have the tools to save them.
November 20, 2015
Alan Greenspan caused the Great Recession. Bernanke could have prevented it, in theory. In practice, that was impossible. The reasons were revealed in his book. At least when the Great Recession did arrive, Bernanke made all the right moves to avoid a greater disaster.
It is well known that yield curve inversions can trigger stock market collapses and recessions. Greenspan inverted the yield curve three times. Each time he inflicted a recession on the nation. Because the economy rebounded from the 1991 recession and enjoyed a period of prosperity under President Clinton, Greenspan was hailed as a great Fed chairman. He successfully blamed his 2001 recession on a “dot.com bubble”. He was gone by the time the Great Recession arrived.
When appointed by President Bush in 2006, Bernanke promised to continue to implement Greenspan’s policies. Every attempt to cut the Fed Funds rate was resisted by some vocal FOMC members. Former Dallas bank president Richard Fisher insisted on tighter monetary policy throughout the recession. He is still predicting hyperinflation. Charles Plosser also pushed for higher rates during the recession. He suggested the Fed Funds rate be set by the Taylor Rule equation until the economy collapsed so rapidly that the equation suggested negative rates.
In a speech on March 20, 2006, Bernanke acknowledged that yield curve inversions were usually followed by recessions but thought that this time could be different because interest rates were at historic lows. It was not different. Tight monetary conditions triggered the housing crisis which was followed by a severe recession.
Subprime lending and the spread of mortgage-backed securities started to unravel as house prices fell. They had been falling slowly since 2006. The Fed provided loans and cut interest rates to ease the crisis. The FDIC resolved troubled banks. The crisis was largely contained.
In the middle of 2008 a new liquidity crisis arose. Investment banks had been providing credit for oil speculators. They were also trading oil futures in their own accounts. Speculators were certain that oil supplies would be cut off when Israel attacked Iran with US support. When the news broke that President Bush would not support an attack, oil prices suddenly crashed from $145 to $90 per barrel. Investment banks suddenly suffered such steep losses that a liquidity crisis threatened world credit markets. Lehman Brothers went bankrupt. Treasury Secretary Hank Paulson asked Congress for $700 to bail out the investment banks. Falling oil prices were never mentioned. The crisis was blamed on mortgage backed securities. Nobody would have supported Paulson’s effort to bail out oil speculators. Bernanke helped to provide cover for the politically unpopular bailout. He sticks to the script in his book.
Oil prices continued to fall until they reached $35 per barrel. Speculators incurred massive losses. Bailout funds from Paulson’s Treasury and asset purchases by the Fed saved the remaining investment banks and AIG who had insured the failed securities.
The book reveals that Paulson showed no interest in helping underwater homeowners or preventing the foreclosures that were purported to be the root cause of the financial collapse. Republicans in Congress were opposed to bailing out the poor and unemployed who, in their view, had no right to buy homes in the first place. They acceded to President Bush's demand to bail out the banks.
Sheila Bair of the FDIC and Congressional Democrats pushed for mortgage assistance for homeowners. Paulson responded with a voluntary program that failed and another program that was so restricted as to be impractical. He had already accomplished his goals. The banks received TARP funds with no restrictions on their use.
Deregulated mortgage financing and unregulated commodity trading were responsible for the greatest financial crisis the world has ever faced. We are lucky that an expert on the Great Depression was running the Fed. He failed to prevent the crisis but at least he kept it from getting worse and engineered a recovery.
It is well known that yield curve inversions can trigger stock market collapses and recessions. Greenspan inverted the yield curve three times. Each time he inflicted a recession on the nation. Because the economy rebounded from the 1991 recession and enjoyed a period of prosperity under President Clinton, Greenspan was hailed as a great Fed chairman. He successfully blamed his 2001 recession on a “dot.com bubble”. He was gone by the time the Great Recession arrived.
When appointed by President Bush in 2006, Bernanke promised to continue to implement Greenspan’s policies. Every attempt to cut the Fed Funds rate was resisted by some vocal FOMC members. Former Dallas bank president Richard Fisher insisted on tighter monetary policy throughout the recession. He is still predicting hyperinflation. Charles Plosser also pushed for higher rates during the recession. He suggested the Fed Funds rate be set by the Taylor Rule equation until the economy collapsed so rapidly that the equation suggested negative rates.
In a speech on March 20, 2006, Bernanke acknowledged that yield curve inversions were usually followed by recessions but thought that this time could be different because interest rates were at historic lows. It was not different. Tight monetary conditions triggered the housing crisis which was followed by a severe recession.
Subprime lending and the spread of mortgage-backed securities started to unravel as house prices fell. They had been falling slowly since 2006. The Fed provided loans and cut interest rates to ease the crisis. The FDIC resolved troubled banks. The crisis was largely contained.
In the middle of 2008 a new liquidity crisis arose. Investment banks had been providing credit for oil speculators. They were also trading oil futures in their own accounts. Speculators were certain that oil supplies would be cut off when Israel attacked Iran with US support. When the news broke that President Bush would not support an attack, oil prices suddenly crashed from $145 to $90 per barrel. Investment banks suddenly suffered such steep losses that a liquidity crisis threatened world credit markets. Lehman Brothers went bankrupt. Treasury Secretary Hank Paulson asked Congress for $700 to bail out the investment banks. Falling oil prices were never mentioned. The crisis was blamed on mortgage backed securities. Nobody would have supported Paulson’s effort to bail out oil speculators. Bernanke helped to provide cover for the politically unpopular bailout. He sticks to the script in his book.
Oil prices continued to fall until they reached $35 per barrel. Speculators incurred massive losses. Bailout funds from Paulson’s Treasury and asset purchases by the Fed saved the remaining investment banks and AIG who had insured the failed securities.
The book reveals that Paulson showed no interest in helping underwater homeowners or preventing the foreclosures that were purported to be the root cause of the financial collapse. Republicans in Congress were opposed to bailing out the poor and unemployed who, in their view, had no right to buy homes in the first place. They acceded to President Bush's demand to bail out the banks.
Sheila Bair of the FDIC and Congressional Democrats pushed for mortgage assistance for homeowners. Paulson responded with a voluntary program that failed and another program that was so restricted as to be impractical. He had already accomplished his goals. The banks received TARP funds with no restrictions on their use.
Deregulated mortgage financing and unregulated commodity trading were responsible for the greatest financial crisis the world has ever faced. We are lucky that an expert on the Great Depression was running the Fed. He failed to prevent the crisis but at least he kept it from getting worse and engineered a recovery.
December 27, 2018
En los mentideros financieros, a Bernanke, antes de convertirse en presidente del Fed, se le conocía con el sambenito de "Helicóptero Ben", como él mismo cuenta en su libro. El origen de la expresión es bifronte. Por un lado, la idea acuñada por Milton Friedman del helicóptero arrojando billetes a una isla, metáfora de los Bancos Centrales que imprimen dinero con el objetivo de que la actividad económica no se derrumbe en épocas de recesión, pero al precio de generar un crecimiento desorbitado de la inflación. Por otro, en un discurso titulado "Deflación: ¿puede ella ocurrir aquí?", y siendo miembro del Comité Federal del Mercado Abierto (FOMC) del Fed, allá por noviembre de 2002, Bernanke planteó que, en un escenario en el que los tipos de interés a corto plazo bajaran a cero y la tasa de inflación cayera a valores negativos, los Bancos Centrales aún podrían hacer cosas. Bernanke propuso varios métodos para reducir los tipos de interés a largo plazo en ese escenario. Uno de ellos, el más extremo: combinar una bajada de impuestos generalizada con la creación de dinero por parte del Banco Central para financiar la rebaja. Justamente la idea que criticó Milton Friedman con su metáfora del helicóptero. A pesar de que aquella reflexión de Bernanke tenía carácter académico y era meramente hipotética, muchos brokers se la tomaron en serio y anticiparon una caída de los tipos de interés. En ese momento, ni los observadores más avezados se imaginaban que la descripción acabaría haciéndose realidad cinco años más tarde. Así que, en cierta forma, puede resumirse "El Valor de Actuar" como la crónica de cómo las condiciones de un experimento mental se hicieron reales y cómo los responsables de la política monetaria reaccionaron en consecuencia, pero careciendo del instrumental necesario y creándolo a medida que iban avanzando por el camino.
"El Valor de Actuar" no es un relato más acerca de la crisis económica de 2008. Es el relato del timonel que gobernó el barco de la política monetaria estadounidense durante los años más duros de la recesión. A través de la lectura de sus páginas somos testigos del proceso deliberativo que se produjo en la sala de máquinas de la economía norteamericana. Un proceso que trajo consigo medidas valientes, arriesgadas y, por distintos motivos no siempre compatibles entre sí, a menudo impopulares... pero acertadas. Conforme al temperamento prudente de su autor, la lectura de "El Valor de Actuar" discurre tranquila, sin estridencias, como al margen de la gravedad de los hechos que describe. Es la serenidad del académico que aparca a un lado sus emociones para presentarnos un relato frío pero preciso de los acontecimientos más relevantes referentes a la toma de decisiones del Fed. O, al menos, todo lo preciso que puede ser un relato de estas características, donde su autor es parte del dramatis personae. Porque, a buen seguro, habrá callado algunas conversaciones, algunas valoraciones personales. Y es que a pesar de su tono académico o, precisamente por ello, no hay en "El Valor de Actuar" ni rastro de artificio o fanfarria, ni un particular o exacerbado sentimiento de orgullo en la labor realizada. Bernanke se comporta como ese antihéroe que carga sobre sus espaldas con las frustraciones de la gente mientras, lejos de los focos, arregla los problemas, sabedor de que ése es su trabajo y no hay ninguna épica en ello. Más allá de sus argumentos, justificaciones y explicaciones, convincentes todas ellas, el verdadero valor del libro reside en esa honestidad desapasionada de la que hace gala su autor en todo momento.
Enlace al resto de la reseña
"El Valor de Actuar" no es un relato más acerca de la crisis económica de 2008. Es el relato del timonel que gobernó el barco de la política monetaria estadounidense durante los años más duros de la recesión. A través de la lectura de sus páginas somos testigos del proceso deliberativo que se produjo en la sala de máquinas de la economía norteamericana. Un proceso que trajo consigo medidas valientes, arriesgadas y, por distintos motivos no siempre compatibles entre sí, a menudo impopulares... pero acertadas. Conforme al temperamento prudente de su autor, la lectura de "El Valor de Actuar" discurre tranquila, sin estridencias, como al margen de la gravedad de los hechos que describe. Es la serenidad del académico que aparca a un lado sus emociones para presentarnos un relato frío pero preciso de los acontecimientos más relevantes referentes a la toma de decisiones del Fed. O, al menos, todo lo preciso que puede ser un relato de estas características, donde su autor es parte del dramatis personae. Porque, a buen seguro, habrá callado algunas conversaciones, algunas valoraciones personales. Y es que a pesar de su tono académico o, precisamente por ello, no hay en "El Valor de Actuar" ni rastro de artificio o fanfarria, ni un particular o exacerbado sentimiento de orgullo en la labor realizada. Bernanke se comporta como ese antihéroe que carga sobre sus espaldas con las frustraciones de la gente mientras, lejos de los focos, arregla los problemas, sabedor de que ése es su trabajo y no hay ninguna épica en ello. Más allá de sus argumentos, justificaciones y explicaciones, convincentes todas ellas, el verdadero valor del libro reside en esa honestidad desapasionada de la que hace gala su autor en todo momento.
Enlace al resto de la reseña
November 24, 2022
Interesting information about the 2008 recession and the loan modification fiasco. Overall it is pretty disgusting how involved politicians are in the United States economy.
December 4, 2015
I typically do not like policy maker memoirs. There at times appears to be a nearly universal effort to shape the record in terms that are favorable to the author's legacy, even to the point of damaging the informational and analytic value of the work in shedding light on the author's work. There are exceptions to this. Robert Gates' memoir of his time at DOD is one. I also liked Hilary Clinton's memoirs of her life at the State Department.
Bernanke's memoirs are very good. He is informative and insightful. He also seems to have considerable self-critical capabilities, although the self-justifying bias is there. That is OK. Bias is fine, as long as it doesn't distract from the value of the book.
Bernanke is unusual, in that he made his academic career in part for his historical analyses of the Great Depression and how the Fed and the US Government dealt with it -- not very well. He is also thoroughly informed of nearly everything credible that has been written about the Great Depression and about the Federal Reserve System. In terms of his prior research and knowledge, it would be hard to imagine anyone who would have been better qualified or more knowledgeable. .... but making decisions in real time is not the same as coming to conclusions about a huge event after all the action has died down and the books have been closed. Academics, especially economists, love to analyze key factors and variables while holding other factors constant (at least statistically). As the point man for the Fed during the financial crises beginning in 2007 and continuing in one form or another for quite a while afterwards, Bernanke could not analyze in terms of "all things being equal". He had to think through issues involving multiple and conflicting forces in highly dynamic settings with huge gaps in information. This is a fundamentally different analytic problem than that faced by the academic and it is what makes high stakes high level economic policy so difficult. Barry Eichengreen's recent book "Hall of Mirrors" specifically compares situations in the Great Depression with those from the more recent crises and highlights the problems decision makers like Bernanke faced. This comes across in Bernanke's book. It is a fascinating account of how problems were understood, analyzed, and reanalyzed, as well as how choices were made and sold in a hyper-political environment. How Bernanke came to understand these problems and how he learned to act - with no little degree of success - makes this a really good book, irrespective of one's philosophy of macro-economic policy may be.
The Federal Reserve inspires a range of reactions, some of which seem almost crazy. Many of the critiques of the book seem to mirror one's view of the Fed. That is unfair and unfairly diminishes the work of a very fine thinker and decision maker. Most of us don't get the chance to perform either role - thinker or decision maker - in positions of any consequence. Bernanke got to do both and did the country a service in the process. I still do not like memoirs, but this one was worth it.
Bernanke's memoirs are very good. He is informative and insightful. He also seems to have considerable self-critical capabilities, although the self-justifying bias is there. That is OK. Bias is fine, as long as it doesn't distract from the value of the book.
Bernanke is unusual, in that he made his academic career in part for his historical analyses of the Great Depression and how the Fed and the US Government dealt with it -- not very well. He is also thoroughly informed of nearly everything credible that has been written about the Great Depression and about the Federal Reserve System. In terms of his prior research and knowledge, it would be hard to imagine anyone who would have been better qualified or more knowledgeable. .... but making decisions in real time is not the same as coming to conclusions about a huge event after all the action has died down and the books have been closed. Academics, especially economists, love to analyze key factors and variables while holding other factors constant (at least statistically). As the point man for the Fed during the financial crises beginning in 2007 and continuing in one form or another for quite a while afterwards, Bernanke could not analyze in terms of "all things being equal". He had to think through issues involving multiple and conflicting forces in highly dynamic settings with huge gaps in information. This is a fundamentally different analytic problem than that faced by the academic and it is what makes high stakes high level economic policy so difficult. Barry Eichengreen's recent book "Hall of Mirrors" specifically compares situations in the Great Depression with those from the more recent crises and highlights the problems decision makers like Bernanke faced. This comes across in Bernanke's book. It is a fascinating account of how problems were understood, analyzed, and reanalyzed, as well as how choices were made and sold in a hyper-political environment. How Bernanke came to understand these problems and how he learned to act - with no little degree of success - makes this a really good book, irrespective of one's philosophy of macro-economic policy may be.
The Federal Reserve inspires a range of reactions, some of which seem almost crazy. Many of the critiques of the book seem to mirror one's view of the Fed. That is unfair and unfairly diminishes the work of a very fine thinker and decision maker. Most of us don't get the chance to perform either role - thinker or decision maker - in positions of any consequence. Bernanke got to do both and did the country a service in the process. I still do not like memoirs, but this one was worth it.
November 10, 2015
We were lucky to have Bernanke at the Fed during the crisis
I read the book with much interest. The writing reflects Bernanke's character: analytic, thoughtful, and respectful. The style is not super engaging, but it reads fluently and there is much to learn from his experiences.
Bernanke faced difficult decisions during his tenure and his academic background on the Great Depression served him well. His actions at the Fed helped avoid a huge depression despite the fact that the financial stress during the Great Recession was likely worse than during the Great Depression. I learned quite a bit about Fed decision making and the interaction between different agencies. I had not quite realized how many different crises the Fed was dealing with (different funding markets, repo, etc). I was surprised that Bernanke did not press more forcefully for the recapitalization of banks, but perhaps this was only politically feasible after the near collapse of the system when it did happen. I wish Bernanke had expanded a little bit more on the economic debates during his tenure, as this might have been more interesting than the many details on whom he met, etc.
Bernanke left the Fed in better much shape than when he started. The institution is now more transparent and it communicates its policy much better than before which is important. Unfortunately, the independence of the Fed is under attack and this could lead to changes in legislation that would reduce the Fed's crisis fighting powers. I hope he continues to educate his (mostly Republican) detractors about the role of the Fed and its vital importance for the economy (US and the World).
The world would be better if we had more people like Bernanke.
I read the book with much interest. The writing reflects Bernanke's character: analytic, thoughtful, and respectful. The style is not super engaging, but it reads fluently and there is much to learn from his experiences.
Bernanke faced difficult decisions during his tenure and his academic background on the Great Depression served him well. His actions at the Fed helped avoid a huge depression despite the fact that the financial stress during the Great Recession was likely worse than during the Great Depression. I learned quite a bit about Fed decision making and the interaction between different agencies. I had not quite realized how many different crises the Fed was dealing with (different funding markets, repo, etc). I was surprised that Bernanke did not press more forcefully for the recapitalization of banks, but perhaps this was only politically feasible after the near collapse of the system when it did happen. I wish Bernanke had expanded a little bit more on the economic debates during his tenure, as this might have been more interesting than the many details on whom he met, etc.
Bernanke left the Fed in better much shape than when he started. The institution is now more transparent and it communicates its policy much better than before which is important. Unfortunately, the independence of the Fed is under attack and this could lead to changes in legislation that would reduce the Fed's crisis fighting powers. I hope he continues to educate his (mostly Republican) detractors about the role of the Fed and its vital importance for the economy (US and the World).
The world would be better if we had more people like Bernanke.
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