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Ben Shalom Bernanke ( ; born December 13, 1953) is an American economist, the former chair of the department of Economics at Princeton Universitymarker and the current Chairman of the United States Federal Reserve. Bernanke succeeded Alan Greenspan on February 1, 2006. He was nominated for a second term by President Barack Obama in 2009 as the Chairman of the Federal Reserve.

Early life

Born in Augusta, Georgiamarker, Bernanke was raised in a ranch house on East Jefferson Street in . His father Philip was a pharmacist and part-time theater manager, and his mother Edna was originally a schoolteacher. 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 Musicmarker in Bostonmarker.

The Bernankes were one of the few Jewish families in the area, attending a local synagogue called Ohav Shalom; as a child, Bernanke learned Hebrew from his maternal grandfather Harold Friedman, who was a professional hazzan and Hebrew teacher. His father and uncle co-owned and managed a drugstore that they bought from his paternal grandfather, Jonas Bernanke. Jonas was born in Boryslavmarker, Austria-Hungary (today part of Ukraine), on January 23, 1891, and immigrated to the United States from Przemyślmarker, Poland (part of Austria-Hungary until 1919). He arrived at Ellis Islandmarker, age 30, Thursday, June 30, 1921, with his wife Pauline, age 25. On the ship’s manifest, Jonas’ occupation is listed as “clerk” and Pauline’s as “doctor med.” They moved to Dillon, South Carolinamarker, from New Yorkmarker in the 1940s. Bernanke’s mother often worked there as well, having given up her job as a school teacher when he was born, and Bernanke also assisted from time to time.

Religion

As a teenager in the 1960's in the small town of Dillon, S.C., Bernanke used to help roll the Torah scrolls in the local Synagogue. Although he keeps his beliefs private, his friend Mark Gertler chairman of New York University’s economics department 2005 commented that, "it is really embedded in who he (Bernanke) is".

Education

Bernanke was educated at East Elementary, J. V. Martin Junior High, and Dillon High School, where he was class valedictorian. Bernanke achieved a near-perfect SAT score of 1590 out of 1600. He was also an All-State saxophonist, playing in the school’s marching band. Bernanke spent his undergraduate years at Harvard University where he lived in Winthrop Housemarker and graduated with a B.A. in economics summa cum laude in 1975. He received his Ph.D. in economics from the Massachusetts Institute of Technologymarker in 1979. His thesis was named "Long-term commitments, dynamic optimization, and the business cycle" and his thesis adviser was Stanley Fischer.

Contemporaries at Harvard University

A notable contemporary at Harvard University was Lloyd Blankfein (A.B. 1975, also Winthrop Housemarker), Chairman & CEO at Goldman Sachs.

Young adult

Bernanke worked construction on a new hospital and waited tables at a restaurant at nearby South of the Border before leaving for college. During the summer, he attended Camp Ramah located in New England. To support himself throughout college, he worked during the summers at South of the Bordermarker, a roadside attraction in his hometown of Dillonmarker.

Academic and government career

Bernanke taught at the Stanford Graduate School of Business from 1979 until 1985, was a visiting professor at New York Universitymarker and went on to become a tenured professor at Princeton Universitymarker in the Department of Economics. He chaired that department from 1996 until September 2002, when he went on public service leave. He resigned his position at Princeton July 1, 2005. Dr. Bernanke served as a member of the Board of Governors of the Federal Reserve System from 2002 to 2005, and was Chairman of the President's Council of Economic Advisers, from June 2005 to January 2006. On February 1, 2006, he was appointed as a member of the Board for a fourteen-year term and to a four-year term as Chairman.

In one of his first speeches, entitled “Deflation: Making Sure It Doesn’t Happen Here,” he outlined what has been referred to as the Bernanke Doctrine.

In view of his current position as Fed chair, Bernanke also sits on the newly established Financial Stability Oversight Board that oversees the Troubled Assets Relief Program.

Bernanke’s future as Federal Reserve chairman became uncertain on November 21, 2008, when it was announced that President-elect Barack Obama would name Tim Geithner as Treasury Secretary over Larry Summers, leading to speculation that Obama was positioning Summers as Bernanke's successor. Summers was picked to run the National Economic Council. Two Obama advisers said that Summers would be the leading candidate to become the next Federal Reserve chairman should President Obama choose not to reappoint Bernanke when his term ends January 31, 2010. White House sources announced on August 24, 2009 that President Obama would nominate Bernanke for another term in 2010. During Bernanke's first term as Chairman, he oversaw the Federal Reserve's largest increase of power since the bank's creation in 1913.


Economic views

He has given several lectures at the London School of Economicsmarker on monetary theory and policy and has written three textbooks on macroeconomics, and one on microeconomics. He was the Director of the Monetary Economics Program of the National Bureau of Economic Research and the editor of the American Economic Review. He is among the 50 most published economists in the world according to IDEAS/RePEc.

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." 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. 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. 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.

In 2002, when the word "deflation" began appearing in the business news, Bernanke gave a speech about deflation. 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 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." 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. Indeed, in his undergraduate economics textbooks he somewhat distances himself from the rhetorical economic libertarianism of Greenspan.

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.

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. Maria Bartiromo disclosed on CNBCmarker their private conversation on Fed policy (in which Bernanke said investors had misinterpreted his comments as indicating that he was "dovish" on inflation), and he was criticized for making public statements about Fed direction.

Texas representative Ron Paul, a member of the House Banking Committee who takes the view that the Federal Reserve System should be abolished, has criticized Bernanke for "continually lowering interest rates," which he avers to have caused drastic inflation and unnecessary growth of the money supply, leading to what Paul refers to as the "inflation tax." However, many economists have argued that failure to have lowered the Fed's target rate would have contributed far more significantly to recession, and urged Bernanke (and the rest of the Federal Open Market Committee) to lower the rate beyond 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."

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. He was dead-on right about that—and the situation would be even worse now if he had listened to his critics then."

Merrill Lynch merger with Bank of America

In a letter to Congress from New York 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. 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.

Awards and fellowships



Renominated for Fed Chief

On 25th Aug 2009, President Obama announced that he would nominate Ben 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. "Ben approached a financial system on the verge of collapse with calm and wisdom, with bold action and out-of-the-box thinking that has helped put the brakes on our economic free fall", the President said.

Senate Banking Committee hearings on his nomination begin December 3, 2009. Robert Borosage, Co-Director of the Campaign for America's Future, has argued that he should not be reappointed.

Bibliography



See also



Footnotes

  1. Bernanke's first name is Ben, not Benjamin; it is not an abbreviated name. (ref: " Big Ben", Slate, October 24, 2005) Bernanke's middle name is Shalom. http://georgewbush-whitehouse.archives.gov/news/nominations/106.html
  2. See inogolo:pronunciation of Ben Bernanke.
  3. Federal Reserve Speech: Chairman Ben S. Bernanke At the presentation of the Order of the Palmetto, Dillon, South Carolina
  4. http://www.nytstore.com/ProdDetailEI.aspx
  5. http://www.nytstore.com/ProdDetailEIImage.aspx?type=passRecord&id=100104040109
  6. http://www.nytstore.com/ProdDetailEIImage.aspx?type=shipMf&id=100104040109
  7. http://www.nytstore.com/ProdDetailEIImage.aspx?type=passRecord&id=100104040110
  8. http://www.federalreserve.gov/boarddocs/speeches/2004/200404162/default.htm
  9. http://www.federalreserve.gov/boarddocs/speeches/2006/20060901/default.htm
  10. The Daily Forward: Fed Nominee Bernanke Was Molded By Upbringing in Small-town South
  11. Next Fed chief: smartest ever? | csmonitor.com
  12. http://www.cbs.com/primetime/60_minutes/video/video.php?cid=927554855&pid=SqN5vDPlDNGTu_V7A8Ab5MF4UpdHB4dQ&play=true&cc=0
  13. Bernanke Biography
  14. FRB Speech: Remarks by Governor Ben S. Bernanke, At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois, November 8, 2002
  15. Bernanke, Ben S., "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," American Economic Review, 73 (June, 1983), pp. 257-76.
  16. "The Financial Accelerator and the Credit Channel", The Credit Channel of Monetary Policy in the Twenty-first Century Conference, Federal Reserve Bank of Atlanta, Atlanta, Georgia (June 15, 2007)
  17. Brad DeLong. " Lecture 10: Depressions and Panics, 1840-1933" Economics 113 - American Economic History UC Berkely
  18. Speech, Bernanke -Deflation- November 21, 2002
  19. Fed Chief Calls His Remarks A Mistake
  20. I don't want to go back to the gold standards there's a better...standard.-Ron Paul July 14th, 2007 Candidates@Google 25:30
  21. "Lawmakers hit out at Paulson over BofA-Merrill". Reuters 12:04 PM ET 07/16/09
  22. Jon Hilsenrath, Elizabeth Williamson and Jonathan Weisman, "Calm in Crisis Won Fed Job: Obama Sticks With 'Bold, Persistent' Chief, but Next Term Could Be Tense if Rates Rise", Wall Street Journal (August 27 2009)
  23. http://www.huffingtonpost.com/robert-l-borosage/in-the-fed-we-trust-will_b_370294.html


References



Further reading



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