Ben Bernanke’s memoir *The Courage to Act*

1. When it comes to South Carolina, he is a cornball, but a likable one.

2. He played Strato-O-Matic baseball as a kid.  No mention of Jim Bunning in that context.

3. After two years at Harvard, he had taken only Econ 101.  Later Dale Jorgensen became his mentor.

4. He is a fan of Borges, with the influence coming from his wife, who has taught Spanish literature.

5. He regrets his earlier tough rhetoric on the Japanese central bank.

6. Greenspan’s marriage proposal to Andrea Mitchell was riddled with his trademark ambiguity.  Bernanke, in contrast, proposed after two months of courtship.

7. Bernanke underestimated the extent of the housing bubble.  Various negative consequences were to ensue from the collapse of housing prices.

8. “I had never gone overboard on libertarianism…”

9. Ben got really, really mad at the AIG chief executives, in fact he “seethed.”

10. The Fed did not have a good, legal way to bail out Lehman.  It needed a buyer, and no buyer was to be found.  A short-term infusion of cash would not have sufficed.  And Ben was afraid at the time that if he confessed the Fed’s impotence in this regard, the market reaction would have been negative.

11. The idea of a mortgage cram down made good sense but was never politically feasible.

12. “So, by setting the interest rate we paid on reserves high enough, we could prevent the federal funds rate from falling too low.”

13. I found the discussions of Wachovia and WaMu came the closest to offering new perspective and information.  Perhaps he was able to say more because these actions did not skirt the possibility of the Fed exceeding its mandate.

14. He had a favorable impression of the frankness of John McCain.

15. He thought QE should been done through the purchase of corporate bonds, but the Fed didn’t have the right kind of authority at that time.

16. He argues that the idea of ngdp targeting is too complicated and could not easily be made credible, given that the Fed has built up its reputation as an inflation fighter.  It also raises the risk that a non-credible ngdp target wouldn’t boost output, but would deliver price inflation, thereby resurrecting stagflation as a potential problem.  (By the way, here is Scott’s response.)

17. He is still upset at the coverage he received from Paul Krugman.

18. In Nunavut he passed on raw seal meat and a dogsled ride.

The bottom lines: This book has way, way more economics than I expected and probably more than the publisher wanted.  It really is Ben’s attempt to defend his place in history, and yes the book does deliver a huge dose of Bernanke.  This is not ghostwritten fluff.  It does not however dish much “dirt” or shed much new light on the key episodes of the financial crisis.  Both in public and in the book Ben has been extremely gentlemanly.  Still, as I kept on reading I could not escape the feeling that he is deeply, deeply annoyed by many of his critics, and very much determined to tell the story from his point of view.  That is what you get from this book.


Thus far, from my perspective, your penultimate sentence is spot on.

The title gives it away, no?

What are you, a publisher? Didn't your mother tell you not to judge a book by its cover?

As an aside, thought the original title was better. I seem to recall it was something along the lines of "Before Asia Opens."

What Mortimer Adler had to say was never uttered by my mother: the cover is what the publisher wants you to see -- First.

Can we agree the title is terrible? Maybe his biographer can call him courageous, but it does not work for auto-biography.

The marketers did not have you in mind.

Agreed, that is a horrendous title. Bernanke is a not the pompous type, but calling your own memoirs "The Courage to Act" is a bit presumptuous.

waves of nausea boil over me...

Hopefully the book is better than the title.

Cowen's review rather suggests that Bernanke didn't have the courage to write. Anyway, I'd no more read a book called *The Courage to Act* than I'd read anything that mentioned zombies.

Because the 'courage to write' to a British snotnose means you dish the dirt.

12. By setting the interest rate the Fed paid on reserves high enough, they could and did prevent the the banks from loaning out much of their excess reserves. This can be compared to the Fed raising reserve requirements in 1937.

+1. Paging Scott Sumner.

When is Bernanke gonna tell us whether he was bribed or coerced into giving hundreds of billions of dollars to cronies, or if he did it just out of affectionate social feeling for crooks who live in the same neighborhoods and eat at the same restaurants he does?

Why cant it be both?

It cannot, because what he did is neither.

He waited until 2015 to get a financial "adviser" job so probably not bribed.

He was an academic before the Fed so are bankers really his peers?

Occum's Razor suggests he was honestly stupid.

What did he do that was 'stupid', and why should your judgments on that be considered authoritative?

He's from Ohio. That's as authoritative as it gets

Of course I am not "authoritative", I am just an internet commentator like you.

Its called an opinion.

Aye, and I also asked you why you fancied him 'stupid'. Crickets.

He never gave 'hundreds of billions of dollars to cronies' except in your imagination. The banks &c were given bridge loans which they paid back. The losses incurred concerned the AIG rescue and the financing of the auto industry. The latter was an initiative of Democratic politicos servicing their clientele and the losses are recorded on the Treasury's books as part of the TARP program, not the Federal Reserve's books. The AIG rescue consisted of the two Maiden Lane deals (on the Federal Reserve's books) and a portion of the TARP program (on the Treasury's books). The losses did not exceed $25 bn and the vast bulk are attributable to the TARP portion.

You cannot split off the Fed and Treasury so neatly. The Fed was the key player. Without Ben's support, no TARP.

Whether losses/profits/expenses are booked by the Fed or Treasury is just accounting.

You cannot split off the Fed and Treasury so neatly.

Oh, yes you can. The Federal Reserve's incorporation renders it a consortium formed by member banks. The Treasury is a public agency. The Treasury's activities require Congressional appropriation. The Federal Reserve's do not.

Oh, no you cannot.

The Federal Reserve's formal status is meaningless in this (and most) situation. Its just a legal fiction to lessen the people's control over economic policy. IMHO, despite the Supreme Court, it is unconstitutional but we have no more Andy Jacksons around.

The Fed and Treasury operated in complete lockstep. Without Ben's blessing, no bailout.

1. You're wrong.

2. It would be an unimportant point even if you were right.

Art Deco:

You are so full of it. The Fed printed cash to buy out-of-the-money securities from cronies, adding on the order of 3 trillion dollars of trash to the Fed's balance sheet. The Fed has been paying banks for nothing with IOR and fees. I could go on. This is all public info. Who do you work for?

I work for no one.

The Federal Reserve trades cash for securities. That's called 'open-market operations' and that's one tool central banks use to regulate the money supply. There's nothing out of the ordinary about it except the scale. On the Federal Reserve's balance sheet are mortgage backed securities and Treasury issues. Neither is 'trash', neither trade below par value, the public interest is uninjured by their presence there, and the peculiar benefits reaped by financial institutions by these open-market operations is difficult to discern (except if you mean some commission income). The Federal Reserve also pays interest on reserves, for the reasons explained. Absent the interest on reserves deposit, the bank's reserves might be redeployed to some other use, so the net benefit to the bank might the difference in returns to be had from some other use. The interest paid on reserves amounts to 0.25% per annum, so the net benefit to the banks is modest.

Sorry your ratio of vehemently stated opinions to actual knowledge is pretty much astronomical, but that's not Dr. Bernanke's fault nor is it mine.

"There’s nothing out of the ordinary about it except the scale."

How was the play Mrs Lincoln?

Nothing out of the ordinary about it except some audience participation.

His point is that QE to regulate the money supply is some sort of giveaway to Dr. Bernanke's 'cronies', which is tommyrot. Yours is what?

What you call "regulating the money supply" is more honestly called "monetizing the debt" or printing-press inflation. If the bad paper the Fed bought was good, then someone without a printing press would have been willing to buy it. The Fed bought assets from cronies to give them something that really would trade "at par" yet even now the Fed holds that paper because what you call "par value" would not persist for an instant if the Fed tried to sell. Everyone whose savings were diluted by the Fed is injured.

What you call “regulating the money supply” is more honestly called “monetizing the debt” or printing-press inflation.

It is not 'more honestly' called that because there is little inflation, and less inflation than there was prior to 2008.

If the bad paper the Fed bought was good, then someone without a printing press would have been willing to buy it.

The Fed purchased it on the secondary market. The Treasury and the mortgage maws have no trouble selling their wares to private parties.

Everyone whose savings were diluted by the Fed is injured.

No one's savings were diluted except in your imagination.


Art Deco is correct on this matter.

But no mention of an important, if not the most important, element of the book? He cites Congress as part of the reason for the weak recovery:

Saying this would not be popular with the audience, and would reveal an uncomfortable truth.


So in other words there is no point in reading it because everyone already knows it is an attempt to defend himself, especially in case something bad happens. If there are no interesting dirt stories or what not then who cares.

What were you expecting?

"not reading it is self-recommending, but I obviously have to"

"The Courage to Act"

'Irony stands mute', Jozef Stalin

There is indeed an irony since he seems to be saying he wishes he had been able to do more but his hands were tied by political and legal realities.

I never saw him try to exercise a bully pulpit on issues like a mortgage cram down, fiscal stimulus or prosecuting bankers (he has been quoted elsewhere recently as saying that bankers should have been prosecuted).

Unless the bankers were peddling structured products and misrepresenting their composition, why would you prosecute them?

I only want them prosecuted if there was a crime. It is my view however that the financial crisis could not have happened unless there was widespread willful or reckless misrepresentation of the quality of mortgages, the quality of mortgage backed securities, the financial position of firms ...

If someone turned a blind eye to the fact that they were packaging up crap and selling it to third parties then that person should have gone to prison.

It is my view however that the financial crisis could not have happened unless there was widespread willful or reckless misrepresentation of the quality of mortgages, the quality of mortgage backed securities, the financial position of firms …

Price bubbles happen and people misprice risk as well. That's not criminal.

"Price bubbles happen and people misprice risk as well. That’s not criminal."

I agree with both those statements but that is not the point I am making. Willfully or recklessly misrepresenting risk is criminal.

is there any electronic version?
im not able to purchase physical version right now

I wish Bernanke's book and Geithner's had been published about the same time. Will I accurately remember Geithner's account when I read Bernanke's? Probably not. Will I re-read Geithner's? Probably not. What I expect from Bernanke is a more academic, or theoretical, account, one that emphasizes not just controlling the crisis but avoiding another one, whereas Geithner, the self-described crisis manager, focused almost exclusively on controlling the crisis - Geithner had no use for fighting windmills. On the academic side, I wish to refer readers to a long and excellent newspaper article in the WP about Olivier Blanchard written by Steven Pearlstein (who teaches at GMU). I think it helpful to step back and look at what has happened these past seven or eight years not just here but elsewhere (Blanchard was the IMF's top economist until resigning recently) and read Bernanke's account in that context. One thing is clear from Pearlstein's account of Blanchard: Blanchard grew into his job.

Blanchard was ridiculed for his multiplier fake:

This correlation was immediately rejected as spurios, depending only on the one data point for Greece.
Last updated: October 12, 2012 11:00 pm, Robustness of IMF data scrutinised, By Chris Giles in London

When it was first represented in fall 2012 by IMF Blanchard, trying to topple the Stability and Growth pact in Europe. Nice try : -)

A more recent version of this :

And Timmie Geithner is remembered as the guy who tried to steal the German Gold.

Arrogant, dishonest, self serving

A prime example why Europeans can not trust any american politician

Timmie Geithner is remembered as the financial wizard who could not do his own taxes correctly.

Regarding line item 17: did Krugman already write his counterpiece, which explains why he was, is and ever will be right, and Bernake and everybody else was, is and will ever be wrong?

We are all blessed by having public servants such as Mr. Bernanke and Mr. Geither.


Re Geithner, yes. Re Bernanke, no.

When you've sobered up, maybe you can explain how that term applies to two sentence fragments with six words in them.

I hesitate to severely criticize people who deal with a crisis real time with limited knowledge and unlimited money buying the foolish mistakes of powerful people, but the whole thing begs the question whether the financial system that exists now was worth the trillions and hours of worry?

Passing TARP was sufficient, it calmed the panic.

There was no need to disburse the funds, other than a few tokens perhaps.

TARP was the outcome of the perfect bluff by Wall Street and financial corporations. Without TARP the collapse of the financial world was imminent. Then TARP passed and without the Treasury even doing what it said it would do the risk of imminent collapse vanished. Then you have bank CEOs saying they were coerced into taking TARP money they did not need! Well who needed it and why? Well we know the answer: Goldman Sachs needed TARP to bail its investments out of a deep hole. And what do you now? A Goldman Sachs alum was in the right right spot to lead the charade and get his "former" client the bailout it needed.

I'm sure the both of you are intimately familiar with everyone's general ledger.

J.P. Morgan and Wells Fargo offered the complaint that the cash was stuffed down their throat. Citigroup and Bank of America required supplementary rescues. The recipients other than AIG and the auto industry components paid dividends on the preferred stock while it was outstanding and then repurchased the stock. If you have a complaint about moral hazard, you can state it, but few bitchers ever do. All of this faux-populist posturing is pretty risible considering that the nubbin of a non-spurious complaint would be that they serviced their two-year bridge loans at 5% rather than 7%.

"I’m sure the both of you are intimately familiar with everyone’s general ledger."

Are you?

Feds gave money to AIG which paid the "counter-parties". In effect AIG laundered the money given to Goldman etc. including the foreign banks.

US taxpayers subsidized German banks. Outstanding work by old Ben!

[BTW, your "STFU, you disagree with me" stick is tedious.]

Feds gave money to AIG which paid the “counter-parties”. In effect AIG laundered the money given to Goldman etc. including the foreign banks.

In effect, AIG laundered money given to every one of its creditors, from Goldman Sachs, to hedge fund operators who bought their credit default swaps to Joe Blow who had a pending insurance claim. The company had a $1 tn balance sheet and received in the 1st instance $185 bn in financing. The share of those liabilities accounted for by Goldman Sachs was in the single digits.

[BTW, your “STFU, you disagree with me” stick is tedious.]

That's not my shtick. That's your subjective reaction to being told you're talking rot.

There was also a sizable program where the Fed bought commercial paper to keep the money markets turning over. That program might have been what saved us more than TARP.

March 9, 2009, markets bottomed and started to rise, sharply, never to reach that low again, once Barney Frank & co leaned on FASB to fix the mess they made of mark-to-market, instituted in 2007 (not a coincidence)

Brian Wesbury of First Trust has written well about this, makes perfect sense.

There was also the FDIC guarantee on bank bonds (which expired in 2012).

"Then TARP passed and without the Treasury even doing what it said it would do the risk of imminent collapse vanished."

Right, the passage was all that was needed.

15. Really! If the Fed can purchase corporate bonds, then why not the social security trust fund (as an example)? Of course, the potential for monkey business would be enormous. Sure, there's potential in connection with the purchase of government bonds, but the ability to purchase corporate bonds would take it to an entirely different level. My explanation for opposing the take-over of the banks was always this: what would the government do the day after? What would the government do the day after it purchases lots of corporate bonds? I often question the financialization of the U.S. economy and what it has done both to the U.S. economy and the world economy. I suspect that even Hamilton would object.

I recall some concerns at the time that there may be a vast conspiracy afoot for the Fed to buy up the economy, and then they would never sell the assets, and lead to a sudden and massive socialist/communist government takeover of the productive apparatus of the economy.

There is an obscene level of distrust of government in the USA, and I half wonder what level of backlash could have occurred had they bought assets in the broader economy instead of focusing on the financial sector.

(I still things it's crazy the number of executives who took crazy risks, then got multi-million dollar payouts as they walked away from companies in their death throes, only made possible by the massive bailouts.)

"obscene level of distrust of government in the USA"

The level of distrust is completely warranted.

In fact, there is way too much trust in government.

There is an obscene level of distrust of government in the USA,

1. Given a fine demonstration project in New York City, the number of county and municipal governments who have bothered to attempt to replicate their successes in law enforcement likely does not make it into two digits.

2. State and local institutions of government and their financing are commonly a hopeless tangle.

3. Watching the New York State legislature or the U.S. Congress in action would cost you much trust in elected officials.

4. Presidential elections are an absurd donnybrook, and yield cretins like the current incumbent.

The Fed purchasing treasury bonds held by the treasury would have no effect. QE could be conducted by giving cash to SS recipients or to all tax filers.

I know, it doesn't really make sense unless they were buying shares.

The reputation that the Fed has gained as an "inflation fighter" (I hope that is TC shorthand and not Bernanke) is exactly the problem. If you "fight" something you are expected to win. So if you fight inflation down to 2% why not go for 1% or 0%. The Fed ought to have tried by its actions and explanations have acquired a reputation as an inflation "manager."

"Sorry guys, we messed up our expectations and the price level has dropped below our 2% trend target, but cross our hearts and hope to die, we'll get it back up."

If he thinks that message is more difficult than to explain that NGDP is below the target trend and the Fed will try to get it back on trend, I do not. As for the dangers of stagflation (with real growth at 0% and inflation racing ahead at 4%?) well, the Fed could reduce it's target. Of course this assumes (and that ID what Bernanke says) that the problem is public/market understanding of the switch. It's more likely that there would be MORE opposition if it were understood (and it would be) that NGDP targeting -- just like PL targeting if the Fed had ever done it -- means more inflation that with an inflation ceiling constraint. There is a political constituency for tight money -- some of it sits on the Fed's Board and I suspect it balloons if a Democrat is in the White House during a recession -- whatever the Fed sets as its target.

As for thinking that QE should be done with corporate bonds, Duh! Did he ask Congress for that authority? Or QE done with a helicopter drop? The debate would have been enlightening.

I appreciate the annoyance Bernanke feels at criticisms that the Fed misbehaved out of lack of technical skill, but he could have done more to explain the political constraints that it faced and how much they have cost us in lost output. The explanation could only help loosen those constraints in the future.

Seems like this blog should discuss Borges more often than it does.

#12. I've always found this argument ludicrous. If there is a zero lower bound problem, it is that, once rates fall to zero, banks have no incentive to lend excess reserves, and monetary policy becomes powerless. Putting interest on reserves doesn't correct the problem. It merely replaces a zero lower bound problem with a >0 lower bound problem. By analogy, imagine that the owner of the Empire State building, noticing that jumpers are OK until they hit the ground, decides to solve the problem by constructing a wide veranda around the 2nd floor.

#16. If the Fed were presently adhering to a simple inflation rule Bernanke might have a point. (In fact I don't think the public is any less capable of understanding the meaning and significance of stable spending than it has been for it to understand the meaning of stable prices or a stable rate of inflation.) But the Fed isn't committed to any simple rule at all; and however complicated NGDP targeting may be, it can't be said to be nearly as complicated as monetary discretion, which is what Bernanke actually appears to favor.

The zero level bound should serve as a stall warning, not as a threshold that must be crossed.

The fundamental problem with ZIRP is debt can no longer be rolled over at a lower interest rate. This is what has necessitated QE, for the only way to sustain the status quo is for the central bank to artificially "juice" the monetary system.


The title is insipid, but it was one might wager the issue of the publisher's marketing department, not Dr. Bernanke. David Kearns was a man capable enough that he was tapped for the position of CEO of Xerox while keeping a marriage together and raising six children. His book, derived from his post-retirement stint as Undersecretary of Education, was called "Winning the Brain Race". Neither corporation executives nor their audiences have the same sensibility as you do.

Krugman loves to make enemies even among people he should be friends with.

It's a reasonable wager that Robin Wells writes his topical commentary.

I don't understand why Bernanke is upset about Krugman. Krugman is generally respectful of Bernanke. Krugman has from time to time said that Bernanke should have done more and now Bernanke writes a book saying he wishes he had been able to do more: where is the unfairness in Krugman's writings?

#3. Tyler, do you mean Ec 10?

That was a question that I was going to ask. But he may've opted to call it Econ 101 to reduce the need for translation. If he'd called it Ec 10, readers would've had to scratch their heads or google it.

And to add to the confusion, there were many years when it was called Social Analysis 10.

Missing the housing/credit bubble and the consequences of its implosion really should disqualify you from ever speaking about the economy again. However, it is really hard to keep your mouth shut when the very guys you bailed out are now waving $250,000 checks in front of your nose for just an hour of your time. Perhaps Bernanke's eventual payday was not foremost on his mind when deciding exactly who would be protected under his Fed umbrella, but I can assure you it was lurking there somewhere.

The Fed is impotent, says Ben S. Bernake in his 2003 FAVAR paper, available online. Fed policy shocks account for 3.2% to 13.2% of a change across many economic variables, i.e., nearly nothing.

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