In his recently published book, “The Courage to Act,” Ben Bernanke calls Bernie Sanders a conspiracy theorist. Really. ABC This Week’s George Stephanopoulos asked the former First Banker about his tenure during the nation’s second most serious financial crisis, and the rationale for taking the courses of action he chose.
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GS: When you look back, what do you think is the single most important thing you got right; the decision that made the biggest difference.
BB: Well, the decision we got right was, was to – there were some folks who said let the financial system fail, it’s just Wall Street, we don’t care, it’s not going to affect the U.S. economy. And our view was that we needed to prevent the financial system from collapsing. If it did collapse, the consequences would not be contained in the southern half of New York City. They would be nationwide, globally bringing down economic activity. So, we were always very aggressive at trying to prevent the crisis from metastacizing into something worse.
GS: And the government sends, what, 80 billion dollars to American International Group, the big insurance company?
BB: We lent – lent, not gave – 85 billion dollars, the Fed did, and this was before the Congress had passed the TARP, which was providing money for capital investments in banks, and that helped it survive, and we did it, not because we cared specifically about AIG, but we were concerned that if it failed, they would bring down the whole financial system.
In the context of having to bail out Wall Street billionaires in order to save Main Street, Stephanopoulos asked Bernanke about his mention of Senator Sanders in his book, as he played a very short clip of Sanders calling Bernanke a failure on the Senate floor:
GS: You insulated yourself from some of this but you couldn’t completely avoid the public debate at the time. You write about walking by cars and seeing bumper stickers “where’s my bailout?”
BB: Absolutely! Where’s my bailout? Yeah!
GS: You understand that anger?
BB: Of course, I understand it! I mean, it seems – it was- inherently unfair that Wall Street was getting help, you know, before Main Street was. Of course, our motives were to try to protect Main Street, but in the end, you know, Main Street took a pretty big hit as well. And so, I totally understand it, absolutely!
GS: Do you think there is something wrong with a system where the only way to save Main Street is to bail out multi-billionaires?
BB: Well, first of all, well, bailing out is a bit of a strong word because the owners of Bear Stearns, for example, the shareholders lost most or all of their wealth. What we were trying to do was to keep these firms from just collapsing and bringing down everything with them. But after the fact, you know, after the crisis was over, it was incredibly important that we take whatever steps necessary to make sure it doesn’t happen again, and to make sure that no firm is too big to fail.
GS: Bernie Sanders.
BB:Mm, hm.
GS: said you failed. [cutaway to clip of Sanders speaking on Senate floor]
BS: Can anybody deny, with a straight face, that the Fed and its chairman, Mr. Bernanke, failed at its task. They failed.
GS: What do you make of that?
BB: Well, I think that I understand the anger. I understand that politicians are going to respond to the public’s concern about the economy, about their own jobs, and so on, I understand that. But I think that, substantively, that they were mistaken.
GS: You also write that Bernie Sanders is basically a conspiracy theorist
[Cutaway to graphic quoting Bernanke’s book on Senator Sanders: “Senator Bernie Sanders… seemed to see the world as a vast conspiracy of big corporations and the wealthy”
GS: Is that what you believe?
BB: I don’t want to get into individual politicians, but, there…
GS: But you write about him in your new book!
BB: Yeah,
GS: He sees conspiracies out there…
BB: Yeah, I think there is a sense that, in the public, in general, that if anything bad happens, it’s got to be because some evil person willed it to happen and, having been inside the government now, I can tell you a lot of things, bad things that happened, because people make mistakes or just don’t make the right choice, rather than them being actively trying to, you know, hurt the economy. That’s not usually what happens.
On the little bit of substance in this last answer, it is surprising to see that Bernanke glosses over much of what we’ve all witnessed since 2010, and particularly 2012, a year in which he took the brunt of much malignment. Could it be that Bernanke is unaware that much of the animus directed toward him originated from the Heritage Institute? Odd…
It is curious that of all of his harshest critics in Congress, Bernie Sanders is the one who made a big enough impression on Bernanke to warrant including in his book. After all, Bernanke was the target of sustained criticism by virtually all Republicans everywhere over every last thing he did at the Fed.. Former Governor Rick Perry even made this threatening comment as Bernanke was about to travel to Texas:
“If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion.”
Here is a representative sample of Bernanke’s treatment at the hands of Bernie Sanders:
All three questions Sanders posed could easily have been asked by any one of the members of the congressional progressive caucus. Senator Sanders’ line of questioning was far from outlandish but, rather, topical, in a visionary kind of way.
Being concerned about conflicts of interests stemming from six out of nine members of regional Fed boards coming from the banking industry is hardly what one can call a conspiracy theory. Sanders asking about income inequality and the skewed concentration of wealth in the summer of 2012 a full year ahead of the buzz generated by Thomas Piketty’s Capital in The Twenty First Century a year later, shows the senator’s deep understanding of the way economies work, and a testament to his remarkable mastery of economic facts which Bernanke did not refute in his answer. Sanders’ final question was about breaking up the banks. Given the fact that, as of today, banks are still too big to fail and in the intervening years since the start of the Great Recession there has been a lot of consolidation, the question seems perfectly a-propos, if ahead of its time as well, given the fact that Senator Elizabeth Warren gave him an actual grilling in the U.S. Senate a year later.
Bernanke’s five minutes with Warren were far more intense than his five minutes with Sanders, and over virtually the same set of issues which, in principle, all participants are in agreement on. Not only are Bernanke, Sanders and Warren in agreement over the need to get rid of Too Big Too Fail, but also on the size of banks. The disagreement is over procedure. Bernanke, clearly, isn’t in favor of writing it into stone, whereas the legislators are. What’s more, one would be hard pressed to find a top moderate to progressive economist who not only doesn’t disagree, but hasn’t written those very same things in op-eds in all the top newspapers. This is as true of Joe Stiglitz, as it is of Lawrence Summers, Robert Reich, Jared Bernstein (whose work I often reprint here), Moises Naim, Paul Krugman and many others.
GS: Most Americans, even though there’s been a fairly strong recovery the last few years don’t feel it, and they think the system is rigged for the wealthy. Are they right?
BB: Well, it’s certainly true that the wealthy and the higher income people have enjoyed disproportionate part of the gains since the economy has recovered, and this is not a new thing, in the spreading out of the income distribution, the accumulation of wealth at the top, has been going on for thirty or forty years. So, to call it rigged, in the sense that some folks sat down and planned it all this way, I’m not quite sure that’s accurate, but there are some very powerful forces at work, including globalization, technical change, international competition, a variety of things that have led to these developments. So, again, it’s not that any individual necessarily willed that, but a whole bunch of longstanding forces have led to that situation.
GS: Given all your years of experience in the government, given all your study, what can be done about that?
BB: Well, it’s the most critical question there is, I mean the economy is only working, insofar as it works for the great bulk of the population, and it is not working for the great bulk of the population because not everyone is sharing in prosperity. Unfortunately, it’s not something that can be solved on a bumper sticker. It’s not something that can be solved overnight, it takes a sustained effort and it could be improved, certainly, and I could give you a long list of policies
GS: Just give me three!
BB: I’ll give you three:
Better training at skills. Getting people up to the point where they can compete in a global economy. That would be the first one.
I mean, public infrastructure. We need to have better roads, airports, bridges. All those things need to be better quality so we, as a country, can compete more effectively.
Research and development. I think the government needs to continue to support R&D to help improve our technical knowledge and to keep America in first place globally in technological advances.
Glossing over Bernanke’s doubts that our economy is rigged, the remainder of his answer is diametrically-opposed to the liberal/progressive view, particularly when it pertains to the “global economy (trade) and the so-called “skills gap.” On infrastructure and R&D, he is in agreement with Sanders, Warren and all other progressives.
So, why is Sanders so much scarier to these people than Elizabeth Warren? If Sanders and Warren have been saying the same things and all these economists have pretty much been saying these same things, and he, Bernanke mostly agrees, then… what’s the problem? Could it be that some are less married to principles they’ve publicly advocated? In the case of Bernanke, a moderate Republican until the publication of his book, one can chalk his lack of support for regulations to some latent libertarian bent. But the others, the liberals in the bunch? It is logical that Summers, as the Secretary of The Treasury who worked hard for the repeal of Glass Steagall, would be against setting Too Big To Fail and the break up of the banks into stone. Stiglitz’ view is unequivocal and committed on both counts. As for that other economist? We’ve yet to hear or read him on Bernie Sanders and Hillary Clinton singly, or on Bernie as compared to Hillary.
The last seven years’ worth of economic analyses, speeches and interviews on what our economy needs are matched most closely by the planks in Sanders’ economic platform, than Clinton’s. One would have to be blind not to detect the antipathy to Sanders on the part of the mainstream corporate media, and this lack of fondness explains the silence on the part of the Truly Important People who have been busy writing about every candidate on the other side of the spectrum for weeks, at times the same ones, over and over again. But yet, nothing on Clinton or Sanders? Sanders has been transparent about his prescriptions. Clinton’s economic speech a few weeks ago was very sparse on details. It was just a week ago that she announced she was against Keystone XL, and at the end of last week that she is against the TPP. We’ve known where Sanders stands forever…
Bernanke will always remain a central figure in our economic history, as the man who single-handedly kept our economy afloat while an obstructed government was forced into semi-austerity. His harsh criticism of Congress, particularly from 2010-on, is spot-on. However, his differences with progressives, as superficial as they are, considering the fact that his brand of moderate Republican no longer exists, place him at the far right end of neoliberalism. As an independent, Bernanke’s economic analyses will remain of much import as the GOP continues to exert disruptive influence over our governance, and our economy by immobilizing them.
I highly doubt that the silent treatment of Bernie Sanders is a matter of labels as All of these Truly Important People know the difference between socialist and Democratic Socialist, and that includes Bernanke. So… what is it? Is it that they feel the Bern and don’t like it? Why? Bernie is no radical and they know it.
If I didn’t know any better, I might suggest it is some sort of old intra-tribal feud pitting one generation and class of Jewish emigres against another. But that’s if I didn’t know better… But I do, right?
Bernie Sanders ‘Mistaken’ With Criticism Over Action During Financial Crisis, Ben Bernanke Says – ABC News
by Benjamin Bell
Ben Bernanke pushed back against past criticism from Democratic presidential candidate Sen. Bernie Sanders over the Fed’s action during the 2008 financial crisis, calling the Vermont senator — and others — “mistaken” in their criticisms.
Sanders specifically has taken aim at Bernanke and his job performance on more than one occasion, including in 2009 when he said Bernanke “failed at all four core responsibilities of the Federal Reserve” during the crisis.
“I understand the anger. I understand the politicians are going to respond to the public’s concern about the economy, about their own jobs and so on. I understand that. But I think that substantively that they were mistaken,” Bernanke said on ABC’s “This Week.””
Read the rest of this article on Bernie Sanders ‘Mistaken’ With Criticism Over Action During Financial Crisis, Ben Bernanke Says – ABC News
Note: The transcript used in this article is my own. It begins at about minute 2:05 into the full interview. The 3-minute clip provided on the This Week site is too heavily edited to be usable. It is not provided here.
Related:
Release: Sanders Puts Hold on Bernanke
WASHINGTON, December 2 – Sen. Bernie Sanders (I-Vt.) today placed a hold on the nomination of Ben Bernanke for a second term as chairman of the Federal Reserve.
“The American people overwhelmingly voted last year for a change in our national priorities to put the interests of ordinary people ahead of the greed of Wall Street and the wealthy few,” Sanders said. “What the American people did not bargain for was another four years for one of the key architects of the Bush economy.”
As head of the central bank since 2006, Bernanke could have demanded that Wall Street provide adequate credit to small and medium-sized businesses to create decent-paying jobs in a productive economy, but he did not.
He could have insisted that large bailed-out banks end the usurious practice of charging interest rates of 30 percent or more on credit cards, but he did not.
He could have broken up too-big-to-fail financial institutions that took Federal Reserve assistance, but he did not.
He could have revealed which banks took more than $2 trillion in taxpayer-backed secret loans, but he did not.
“The American people want a new direction on Wall Street and at the Fed. They do not want as chairman someone who has been part of the problem and who has been responsible for many of the enormous difficulties that we are now experiencing,” Sanders said. “It’s time for a change at the Fed.”
The Federal Reserve has four main responsibilities: to conduct monetary policy in a way that leads to maximum employment and stable prices; to maintain the safety and soundness of financial institutions; to contain systemic risk in financial markets; and to protect consumers against deceptive and unfair financial products.
Since Bernanke took over as Fed chairman in 2006, unemployment has more than doubled and, today, 17.5 percent of the American workforce is either unemployed or underemployed.
Not since the Great Depression has the financial system been as unsafe, unsound, and unstable as it has been during Mr. Bernanke’s tenure. More than 120 banks have failed since he became chairman.
Under Bernanke’s watch, the value of risky derivatives held at our nation’s top commercial banks grew from $110 trillion to more than $290 trillion, 95 percent of which are concentrated in just five financial institutions.
Bernanke failed to prevent banks from issuing deceptive and unfair financial products to consumers. Under his leadership, mortgage lenders were allowed to issue predatory loans they knew consumers could not afford to repay. This risky practice was allowed to continue long after the FBI warned in 2004 of an “epidemic” in mortgage fraud.
After the financial crisis hit, Bernanke’s response was to provide trillions of dollars in virtually zero-interest loans and other taxpayer assistance to some of the largest financial institutions in the world. Adding insult to injury, Bernanke refused to tell the American people the names of the institutions that received this handout or the terms involved.
“Mr. Bernanke has failed at all four core responsibilities of the Federal Reserve,” Sanders concluded. “It’s time for him to go.”
I Can Still Stop This . . .
It was 8:00 p.m. Tuesday, September 16, 2008. I was exhausted, mentally and emotionally drained, but I could not sit. Through the windows of my office in the Federal Reserve’s Eccles Building, I could see the lights of the traffic on Constitution Avenue and the shadowy outlines of American elms lining the National Mall. Dozens of staff members remained at work, but the corridor immediately outside my door was hushed and empty. Michelle Smith, the head of our communications office and my chief of staff, sat quietly, the only other person in the room. She was waiting for me to say something.
Four hours earlier, Treasury secretary Hank Paulson and I had sat side by side in tan leather armchairs in the windowless Roosevelt Room of the White House, steps from the Oval Office. A portrait of Teddy Roosevelt as Rough Rider on a rearing horse hung above a fireplace. Facing Hank and me across the room’s polished wood table sat the current occupant of the White House, a somber George W. Bush, with Vice President Dick Cheney at his side. The president’s advisers, Hank’s senior aides, and representatives of other financial regulatory agencies filled the remaining dozen seats around the table.
Usually, the president liked to keep things light at meetings, by opening with a wisecrack or good-naturedly teasing a close adviser. Not that afternoon. He asked bluntly, “How did we get to this point?”
The question was rhetorical. We had been fighting an out-of-control financial crisis for more than a year. In March, the Fed had lent $30 billion to help JPMorgan Chase save the Wall Street investment bank Bear Stearns from failure. In early September, the Bush administration had taken over Fannie Mae and Freddie Mac to prevent the collapse of the two companies responsible for financing roughly half of all residential mortgages in the United States. And just the day before, at 1:45 a.m., Lehman Brothers—the nation’s fourth-largest investment bank—had filed for bankruptcy, following a frantic and ultimately futile search for a merger partner led by Hank and New York Fed president Tim Geithner.
Now I found myself explaining to the president why the Federal Reserve was planning to lend $85 billion to American International Group (AIG), the world’s largest insurance company. The company had gambled recklessly, using exotic financial instruments to insure securities backed by subprime mortgages. Now that those mortgages were going bad at record rates, the financial firms that had bought the insurance, together with other AIG counterparties, were demanding payment. Without the cash, AIG would go bankrupt within days, perhaps hours. We weren’t motivated by any desire to help AIG, its employees, or its shareholders, I told the president. Rather, we didn’t think that the financial system—and, more importantly, the economy—could withstand its bankruptcy.
Reacting to the Lehman failure, markets already were in the grip of a full-blown panic of an intensity not seen since the Depression. The Dow Jones industrial average had plunged 504 points on Monday—its steepest one-day point decline since September 17, 2001, the first day of trading after the September 11 terrorist attacks—and the selling wave had spread to markets worldwide. As confidence in financial institutions disappeared, interest rates on loans between banks had shot skyward. Ominously, we were receiving reports of both large and small investors pulling their cash out of money market mutual funds after a large fund suffered losses stemming from Lehman’s collapse.
Everyone in the room knew that rescuing AIG would be terrible politics in a presidential election year. Just two weeks earlier, the president’s own party had declared flatly in its 2008 convention platform, “We do not support government bailouts of private institutions.” The Federal Reserve’s proposed intervention would violate the basic principle that companies should be subject to the discipline of the market and that the government should not shield them from the consequences of their mistakes. Still, I knew that, as chaotic as financial conditions were now, they could become unimaginably worse if AIG defaulted—with unknowable but assuredly catastrophic consequences for the U.S. and global economies.
With more than $1 trillion in assets, AIG was more than 50 percent larger than Lehman. It operated in more than 130 countries and had more than 74 million individual and corporate customers worldwide. It provided commercial insurance to 180,000 small businesses and other corporate entities employing 106 million people—two-thirds of American workers. Its insurance products protected municipalities, pension funds, and participants in 401(k) retirement plans. AIG’s collapse could well trigger the failures of yet more financial giants, both in the United States and abroad.
The president, grim-faced, listened carefully. Paulson had warned him earlier in the day that action on AIG might be necessary, and he knew that our options were severely limited. No private investors were interested in buying or lending to AIG. The administration had no money and no authority to rescue it. But the Fed could lend to AIG to keep it afloat if the company’s many subsidiaries retained enough value to serve as collateral for the loan.
Bush responded as he had consistently during the financial crisis, by reiterating his trust in Hank’s and my judgment. He said that we should do what was necessary, and that he would do what he could to provide political cover. I was grateful for his confidence, and for his willingness to do the right thing regardless of the likely political consequences for himself and his party. Having the president’s support was crucial. At the same time, essentially, the president was telling Paulson and me that the fate of the U.S. and global economies was in our hands.
Our next meeting, at half past six that evening at the Capitol, had been even tougher. Hank and I gathered with congressional leaders in a cramped conference room. House Speaker Nancy Pelosi wasn’t able to attend the hastily arranged gathering, but Senate majority leader Harry Reid and House minority leader John Boehner were there, along with Senate Banking Committee chairman Chris Dodd, House Financial Services Committee chairman Barney Frank, and several others.
Hank and I again explained AIG’s situation and our proposed response. We were besieged with questions. The lawmakers asked about the Fed’s authority to lend to an insurance company. Normally, the Fed is empowered to lend only to banks and savings institutions. I explained a Depression-era provision of the Federal Reserve Act—Section 13(3)—that gave us authority in “unusual and exigent circumstances” to lend to any individual, partnership, or corporation. The lawmakers wanted to understand the consequences of letting AIG fail and how the loan would be paid back. We answered as best we could. Yes, we believed this step was necessary. No, we could make no guarantees.
As the questions began to die down, I looked over and saw Senator Reid wearily rubbing his face with both hands. Finally he spoke. “Mr. Chairman. Mr. Secretary,” he said. “I thank you for coming here tonight to tell us about this and to answer our questions. It was helpful. You have heard some comments and reactions. But don’t mistake anything anyone has said here as constituting congressional approval of this action. I want to be completely clear. This is your decision and your responsibility.”
I returned to my office. Tim Geithner, who had negotiated the bailout deal, called with the news that AIG’s board had agreed to our proposed terms. The terms were tough, for good reason. We didn’t want to reward failure or to provide other companies with an incentive to take the types of risks that had brought AIG to the brink. We would charge a high interest rate on the loan and take an ownership stake in the company of nearly 80 percent, so taxpayers could benefit if the rescue worked. The Federal Reserve’s own Board had approved the deal earlier that day. All we needed to do now was put out the press release.
But I needed a few moments to think about it all. I believed we were doing the right thing. I believed we had no other reasonable choice. But I also knew that sometimes the decision-making process acquires a momentum of its own. It was important to be sure. Without doubt, the risks we would be taking were huge. Though $85 billion was an enormous sum, much more was at stake than money. If AIG failed even with the loan, the financial panic would intensify, and market confidence in the Fed’s ability to control the crisis could be destroyed. Moreover, the future of the Fed itself could be at risk. Senator Reid had made clear that Congress would accept no responsibility. The president would defend us, but in a few months he would be out of office. If we failed, an angry Congress might eviscerate the Fed. I did not want to be remembered as the person whose decisions had led to the Fed’s destruction.
I can still stop this, I thought, as I looked out at Constitution Avenue. The loan required unanimous Board approval, so all I would have to do would be to change my own vote. I said as much to Michelle and added, “We haven’t announced anything.”
If we acted, nobody would thank us. But if we did not act, who would? Making politically unpopular decisions for the long-run benefit of the country is the reason the Fed exists as a politically independent central bank. It was created for precisely this purpose: to do what must be done—what others cannot or will not do.
Michelle interrupted my thoughts. “We have to put something out,” she said softly.
“Okay,” I said. “It’s got to be done. Let’s look at the press release one last time.” It began, “For release at 9:00 p.m. EDT: The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group . . . ”
Excerpt originally published on ABCNews.com
Related:
Bernanke Defending Fed Actions to Battle Recession
By MARTIN CRUTSINGER, AP ECONOMICS WRITER
WASHINGTON — Oct 5, 2015
Former Federal Reserve Chairman Ben Bernanke says the U.S. economy is outperforming Europe at the moment because the Fed moved more quickly and aggressively to fight the 2008 financial crisis than Europe did.
Bernanke, writing an opinion piece in the Wall Street Journal on Monday, said that U.S. economic output is 8.9 percent higher than its previous peak before the recession. That is “an enormous difference” from the Eurozone, where output is only 0.8 percent higher than its previous peak.
Bernanke credited those differences to aggressive efforts by the Fed to jump-start economic growth. He said the Fed started six years ahead of moves by the European Central Bank.
In his opinion piece, Bernanke was critical of the fact that for too long, the Fed was the only game in town in terms of pursuing efforts to get the country out of the worst economic downturn since the Great Depression because of political gridlock in Congress.
“Monetary policy (interest rates controlled by the Fed) can no longer be the only game in town. Fiscal policy makers in Congress need to step up,” Bernanke wrote. “We need to do more to improve worker skills, foster capital investment and support research and development.”
Read the rest of this article on ABCNews.com
My transcript of the Stephanopoulos interview starting 02:05 minutes:
GS: When you look back, what do you think is the single most important thing you got right; the decision that made the biggest difference?
BB: Well, the decision we got right was, was to – there were some folks who said let the financial system fail, it’s just Wall Street, we don’t care, it’s not going to affect the U.S. economy, and our view was that we needed to prevent the financial system from collapsing.
GS: You couldn’t completely avoid the public debate at the time. You write about walking by parked cars and seeing bumper stickers “where’s my bailout?”
BB: Absolutely! Where’s my bailout? Yeah!
GS: You understand that anger?
BB: Of course, I understand it! I mean, it seems – it was- inherently unfair that Wall Street was getting help, you know, before Main Street was. Of course, our motives were to try to protect Main Street, but in the end, you know, Main Street took a pretty big hit as well.
GS: Do you think there is something wrong with a system where the only way to save Main Street is to bail out multi-billionaires?
BB: Well, first of all, well, bailing out is a bit of a strong word because the owners of Bear Stearns, for example, the shareholders lost most or all of their wealth. What we were trying to do was to keep these firms from just collapsing and bringing down everything with them.But after the fact, you know, after the crisis was over, it was incredibly important that we take whatever steps necessary to make sure it doesn’t happen again, and to make sure that no firm is too big to fail.
GS: Bernie Sanders.
BB:Mm, hm.
GS: said you failed. [cutaway to clip of Sanders speaking on Senate floor]
BS: Can anybody deny, with a straight face, that the Fed and its chairman, Mr. Bernanke, failed at its task. They failed.
GS: What do you make of that?
BB: Well, I think that I understand the anger. I understand that politicians are going to respond to the public’s concern about the economy, about their own jobs, and so on, I understand that. But I think that, substantively, that they were mistaken.
GS: You also write that Bernie Sanders is basically a conspiracy theorist
[Cutaway to graphic quoting Bernanke’s book on Senator Sanders: “Senator Bernie Sanders… seemed to see the world as a vast conspiracy of big corporations and the wealthy”
GS: Is that what you believe?
BB: I don’t want to get into individual politicians, but, there…
GS: But you write about him in your new book!
BB: Yeah,
GS: He sees conspiracies out there…
BB: Yeah, I think there is a sense that, in the public, in general, that if anything bad happens, it’s got to be because some evil person willed it to happen and, having been inside the government now, I can tell you a lot of things, bad things that happened, because people make mistakes or just don’t make the right choice, rather than them being actively trying to, you know, hurt the economy. That’s not usually what happens.
GS: Most Americans, even though there’s been a fairly strong recovery the last few years don’t feel it, and they think the system is rigged for the wealthy. Are they right?
BB: Well, it’s certainly true that the wealthy and the higher income people have enjoyed disproportionate part of the gains since the economy has recovered, and this is not a new thing, in the spreading out of the income distribution, the accumulation of wealth at the top, has been going on for thirty or forty years. So, to call it rigged, in the sense that some folks sat down and planned it all this way, I’m not quite sure that’s accurate, but there are some very powerful forces at work, including globalization, technical change, international competition, a variety of things that have led to these developments. So, again, it’s not that any individual necessarily willed that, but a whole bunch of longstanding forces have led to that situation.
GS: Given all your years of experience in the government, given all your study, what can be done about that?
BB: Well, it’s the most critical question there is, I mean the economy is only working, insofar as it works for the great bulk of the population, and it is not working for the great bulk of the population because not everyone is sharing in prosperity. Unfortunately, it’s not something that can be solved on a bumper sticker. It’s not something that can be solved overnight, it takes a sustained effort and it could be improved, certainly, and I could give you a long list of policies
GS: Just give me three!
BB: I’ll give you three:
Better training at skills. Getting people up to the point where they can compete in a global economy. That would be the first one.
I mean, public infrastructure. We need to have better roads, airports, bridges. All those things need to be better quality so we, as a country, can compete more effectively.
Research and development. I think the government needs to continue to support R&D to help improve our technical knowledge and to keep America in first place globally in technological advances.
GS: You’ve also blamed the Congress in your book for making the economic situation worse. How?
BB: After the early fiscal program in 2009, from 2010 on, fiscal policy in the United States was very tight, very contractionary. There were far fewer jobs created through the public sector than in previous recoveries, for example. That was made worse, because in the United States, a lot of government spending takes place at the state and local level and with the balanced budget rules they have at those levels, state and local governments that were cutting, cutting, cutting their capital expenditures, cutting their jobs, and with the federal government kind of neutral, the overall effect was to have a very tight fiscal policy.
GS: So, let’s say that at the height of the crisis you had even more power than President Bush said you had, you’re emperor for a day, should Congress have passed an even larger stimulus in 2008-2009?
BB: I think, I think it would – needed – to be larger because it was being offset very substantially at the state and local level where there was a lot of contraction and more importantly than that, I think, the government switched too quickly in 2009 and after in 2010, switched too quickly to kind of tight contractionary policy cutbacks, sequesters, you know, shutting the government down. All these things which are understandable what the motivation is, but have had the effect of slowing the recovery and putting too much on the Fed. So a lot of people were concerned that the fed was doing too much, you know, interest rate’s been too low for too long, all those things. The reason that’s the case is that the Fed has been the only game in town. The Fed has been the only government institution that’s been trying to push for recovery, so it all falls on the Fed. If others were contributing more, the Fed could do it less.
GS: Before you were with the Fed, you were in the White House in President Bush’ Council for Economic Advisers, but you’re no longer a Republican. Why not?
BB: I’m a moderate now. I’m a moderate and I’m hoping for people who can work across the aisle cooperatively. You know, I think that in both parties, the extremes have moved out and I am less comfortable with some of the, particularly the anti-Fed rethoric you see in the populist wings of both parties. So, you see, I prefer to be non-partisan in the middle.
GS: Any candidates there? Well, I hope so! This is kind of a time, an early stage, at this point.
GS: Finally, if a future Fed Chair, a future professor of economics is studying your role in the crisis, is studying the crisis, what is the most important lesson you hope they take from it?
BB: Well, in economics, I think, the importance of keeping the financial systems stable and providing the financial credit and support that is needed. I think it’s really critical (from an) economic perspective to get that done and it’s a really important lesson that we tried to carry through. And I think, you know, consistent with the title of the book, the courage to act, you also have to know that sometimes it’s hard to do the right thing because the political environment, the public discourse is very much against it, and it this case, we really did what we thought the right thing and it was the right thing to help our economy recover.
GS: Mr. Chairman, thank you very much.
BB: Thanks for having me.
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