Early and personal life
Bernanke was born in
North Augusta, South Carolina, and was raised in a
ranch-style house on East Jefferson Street in
Dillon, South Carolina.
[3] His father Philip was a pharmacist and part-time theater manager, and his mother Edna was an elementary schoolteacher.
[4] He is the eldest of three children, having a brother and sister. His younger brother, Seth, is a lawyer in Charlotte, North Carolina, and his younger sister, Sharon, is a longtime administrator at
Berklee College of Music in
Boston.
The Bernankes were one of the few
Jewish families in the area, attending a local
synagoguecalled Ohav Shalom;
[5] as a child, Bernanke learned
Hebrew from his maternal grandfather Harold Friedman, who was a professional
hazzan,
shochet, and Hebrew teacher.
[6][7] His father and uncle co-owned and managed a drugstore that they bought from his paternal grandfather, Jonas Bernanke.
[3] Jonas was born in
Boryslav,
Austria–Hungary (today part of Ukraine), on January 23, 1891, and emigrated to the United States from
Przemyśl, Poland (part of
Austria–Hungary until 1918). He arrived at
Ellis Island, aged 30, Thursday, June 30, 1921, with his wife Pauline, aged 25. On the ship's manifest, Jonas's occupation is listed as "clerk" and Pauline's as "doctor med."
[8][9][10][11] They moved to
Dillon, South Carolina, from
New York in the 1940s.
[12] Bernanke's mother often worked in the family drugstore, having given up her job as a school teacher when her son was born, and Bernanke also assisted from time to time.
[13][edit]Young adult
Bernanke worked construction on a new hospital and waited tables at a restaurant at nearby
South of the Border, a roadside attraction in his hometown of
Dillon, before leaving for college.
[3][14] To support himself throughout college, he worked during the summers at South of the Border.
[3][15][edit]Religion
As a teenager in the 1960s in the small town of
Dillon, South Carolina, Bernanke used to help roll the
Torah scrolls in his local
synagogue. Although he keeps his beliefs private, his friend
Mark Gertler, chairman of New York University's economics department, commented in 2005 that, "it is really embedded in who he (Bernanke) is".
[16] On the other hand, the Bernanke family was concerned that Ben would "lose his Jewish identity" if he went to Harvard. Fellow Dillon native
Kenneth Manning, an African-American who would eventually become a professor of the History of Sciences at MIT, helped assure the family that "there were Jews in Boston." Once at Harvard, Manning took Bernanke to a Rosh Hashanah services in Brookline his freshman year. Manning says that he found the services more meaningful than Bernanke did.
[17][edit]Education
[edit]Adult life
[edit]Academic and government career
As a Member of the Board of Governors of the Federal Reserve System on February 20, 2004, Bernanke gave a speech:
The Great Moderation, where he postulated that we are in a new era, where modern macroeconomic policy has decreased the volatility of the business cycle to the point that it should no longer be a central issue in economics.
[25]In June 2005, Bernanke was named Chairman of President George W. Bush's Council of Economic Advisers, and resigned as Fed Governor. The appointment was widely viewed as a test run to ascertain if Bernanke could be Bush's pick to succeed Greenspan as Fed chairman the next year.
[26] He held the post until January 2006.
[edit]Chairman of the United States Federal Reserve
On February 1, 2006, President Bush appointed Bernanke to a fourteen-year term as a member of the Federal Reserve Board of Governors, and to a four-year term as Chairman.
[27][28] By virtue of the chairmanship, he sits on the
Financial Stability Oversight Board that oversees the
Troubled Asset Relief Program. He also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policy making body.
His first months as chairman of the Federal Reserve System were marked by difficulties communicating with the media. An advocate of more transparent Fed policy and clearer statements than Greenspan had made, he had to back away from his initial idea of stating clearer inflation goals as such statements tended to affect the stock market.
[29] Maria Bartiromo disclosed on
CNBC comments from their private conversation at the
White House Correspondents' Association Dinner.
[30] She reported that Bernanke said investors had misinterpreted his comments as indicating that he was "dovish" on inflation. He was sharply criticized for making public statements about Fed direction, which he said was a "lapse in judgment."
During Bernanke's first term as Chairman, the Federal Reserve experienced its largest increase of power since its creation in 1913.
[31]On August 25, 2009, President Obama announced he would nominate Bernanke to a second term as chairman of the Federal Reserve. In a short statement in Martha's Vineyard, with Bernanke standing at his side, Obama said Bernanke's background, temperament, courage and creativity helped to prevent another
Great Depression in 2008.
[32] When Senate Banking Committee hearings on his nomination began on December 3, 2009, several Senators from both parties indicated they would not support a second term.
[33][34][35][36][37][38] However, Bernanke was confirmed for a second term as Chairman on January 28, 2010, by a 70–30 vote of the full Senate,
[39] historically the narrowest margin for any occupant of the position.
[40] (For the roll-call vote, see
Obama confirmations, 2010.) The Senate first voted 77–23 to end debate, Bernanke winning more than the 60 approval votes needed to overcome the possibility of a
filibuster.
[41] On a second vote to confirm, the 30 dissents came from 11 Democrats, 18 Republicans and one independent.
[41][edit]Controversies as Fed Chairman
According to the
New York Times, Bernanke "has been attacked for failing to foresee the
financial crisis, for
bailing out Wall Street, and, most recently, for injecting an additional $600 billion into the banking system to give the slow recovery a boost."
[42] Congressman
Ron Paulhas said, referring to Bernanke: "There is something fishy about the head of the world’s most powerful government
bureaucracy, one that is involved in a full-time
counterfeiting operation to sustain
monopolistic financial cartels, and the world’s most powerful
central planner, who sets the price of money worldwide, proclaiming the glories of
capitalism.”
[42][edit]Merrill Lynch merger with Bank of America
In a letter to Congress from
New York State Attorney General Andrew Cuomo dated April 23, 2009, Bernanke was mentioned along with former
Treasury Secretary Henry Paulson in allegations of fraud concerning the acquisition of
Merrill Lynch by
Bank of America. The letter alleged that the extent of the losses at Merrill Lynch were not disclosed to Bank of America by Bernanke and Paulson. When Bank of America CEO
Kenneth Lewis informed Paulson that Bank of America was exiting the merger by invoking the "Materially Adverse Change" clause Paulson immediately called Lewis to a meeting in Washington. At the meeting, which allegedly took place on December 21, 2008, Paulson told Lewis that he and the board would be replaced if they invoked the MAC clause and additionally not to reveal the extent of the losses to shareholders. Paulson stated to Cuomo's office that he was directed by Bernanke to threaten Lewis in this manner.
[43]Congressional hearings into these allegations were conducted on June 25, 2009, with Bernanke testifying that he did not bully Ken Lewis. Under intense questioning by members of Congress, Bernanke said, "I never said anything about firing the board and the management [of Bank of America]." In further testimony, Bernanke said the Fed did nothing illegal or unethical in its efforts to convince Bank of America not to end the merger. Lewis told the panel that authorities expressed "strong views" but said he would not characterize their stance as improper.
[44][edit]AIG bailout
According to a January 26, 2010, column in
The Huffington Post, a
whistleblower has disclosed documents providing
"'troubling details' of Bernanke's role in the AIG bailout". Republican Senator
Jim Bunning of Kentucky said on CNBC that he had seen documents which show Bernanke overruled recommendations from his staff in bailing out AIG. The columnist says this raises questions as to whether or not the decision to bail out AIG was necessary. Senators from both parties who support Bernanke say his actions averted worse problems and outweigh whatever responsibility he may have for the financial crisis.
[45][edit]Economic views
Bernanke is particularly interested in the economic and political causes of the
Great Depression, on which he has written extensively. Before Bernanke's work, the dominant
monetarist theory of the Great Depression was
Milton Friedman's view that it had been largely caused by the
Federal Reserve's having reduced the
money supply. In a speech on Milton Friedman's ninetieth birthday (November 8, 2002), Bernanke said, "Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna [Schwartz, Friedman's coauthor]: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."
[46] Bernanke has cited Milton Friedman and Anna Schwartz in his decision to lower interest rates to zero.
[47] Anna Schwartz however is highly critical of Bernanke and wrote an opinion piece on New York Times to advise President Obama against his reappointment to Chair of Federal Reserve. Bernanke focused less on the role of the Federal Reserve, and more on the role of private banks and financial institutions.
[48] Bernanke found that the financial disruptions of 1930–33 reduced the efficiency of the credit allocation process; and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand, identifying an effect he called the
financial accelerator. When faced with a mild downturn, banks are likely to significantly cut back lending and other risky ventures. This further hurts the economy, creating a
vicious cycle and potentially turning a mild recession into a major depression.
[49] Economist
Brad DeLong, who had previously advocated his own theory for the Great Depression, notes that the current
financial crisis has increased the pertinence of Bernanke's theory.
[50]In 2002, following coverage of concerns about
deflation in the business news, Bernanke gave a speech about the topic.
[51] In that speech, he mentioned that the government in a
fiat money system owns the physical means of creating money. Control of the
means of production for money implies that the government can always avoid deflation by simply issuing more money. He said "The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost." (He referred to a statement made by
Milton Friedman about using a "
helicopter drop" of money into the economy to fight deflation.) Bernanke's critics have since referred to him as "Helicopter Ben" or to his "helicopter printing press." In a footnote to his speech, Bernanke noted that "people know that
inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation."
[51] For example, while Greenspan publicly supported President Clinton's deficit reduction plan and the
Bush tax cuts, Bernanke, when questioned about taxation policy, said that it was none of his business, his exclusive remit being monetary policy, and said that fiscal policy and wider society related issues were what politicians were for and got elected for. But Bernanke has been identified by the Wall Street Journal and a close colleague as a "libertarian-Republican" in the mold of Alan Greenspan.
[47] However,
Bloomberg Newswrites he is "siding with John Maynard Keynes against Milton Friedman by flooding the financial system with money".
[52][53]In 2005 Bernanke coined the term
saving glut, the idea, which does not take into account time preference, that a worldwide oversupply of
savings finances the current account deficits of the United States and keeps interest rates low.
[54]As the recession began to deepen in 2007, many economists urged Bernanke (and the rest of the
Federal Open Market Committee) to lower the
federal funds rate below what it had done. For example,
Larry Summers, who currently serves as Director of the White House's
National Economic Council under President Barack Obama, wrote in the
Financial Times on November 26, 2007—in a column in which he argued that recession was likely—that "... maintaining demand must be the over-arching macro-economic priority. That means the Federal Reserve System has to get ahead of the curve and recognize—as the market already has—that levels of the Federal Funds rate that were neutral when the financial system was working normally are quite contractionary today."
[55]David Leonhardt of
The New York Times wrote, on January 30, 2008, that "Dr. Bernanke's forecasts have been too sunny over the last six months. [On] the other hand, his forecast was a lot better than Wall Street's in mid-2006. Back then, he resisted calls for further interest rate increases because he thought the economy might be weakening."
[56] [edit]Statements on deficit reduction and reform of Social Security / Medicare
Bernanke favors reducing the
U.S. budget deficit, particularly by reforming the
Social Security and
Medicare entitlement programs. During a speech delivered on April 7, 2010, he warned that the U.S. must soon develop a "credible" plan to address the pending
funding crisis faced by "entitlement programs such as Social Security and Medicare" or "in the longer run we will have neither financial stability nor healthy economic growth."
[57][58] Bernanke said that formulation of such a plan would help the economy now, even if actual implementation of the plan might have to wait until the economic outlook improves.
[59] His remarks were probably intended for the federal government's executive and legislative branches,
[60] since entitlement reform is a
fiscal exercise that will be accomplished by the
Congress and the
President[61][62] rather than a
monetary task falling within the implementation powers of the Federal Reserve. Bernanke also pointed out that deficit reduction will necessarily consist of either raising
taxes, cutting entitlement payments and other
government spending, or some combination of both.
[63]
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