Ben Bernanke is no longer helming the Federal Reserve System – those duties now belong to his successor, Janet Yellen. Although he left the central bank and the United States in pretty bad shape, Bernanke now believes the Fed could have done a lot more during the height of the economic collapse.
Making his first public speaking engagement in front of 1,000 bankers and financial professionals since exiting the Fed on Tuesday, Bernanke suggested that the central bank could have employed more measures to circumvent dire issues. He added that he had a difficult time communicating to markets.
“We could have done some things on the margin to mitigate somewhat the crisis,” stated Bernanke, who noted that he can now speak more freely since he stepped down. “Although we have been very aggressive, I think on the monetary policy front we could have been even more aggressive.”
Bernanke argued that the United States became “overconfident” prior to the crash in 2008 and the collapse of Lehman Brothers. “This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises,” Bernanke said in Abu Dhabi, where he was paid $250,000 for his appearance by the National Bank of Abu Dhabi.
After allocating an astronomical sum of money to domestic and foreign financial institutions, Bernanke felt that the central bank was in a terrible “political” situation where public officials could have accused him of bailing out certain organizations unjustly.
“That was actually very hard for me to get adjusted to that situation where your words have such effect. I came from the academic background and I was used to making hypothetical examples and I learned I can’t do that because the markets do not understand hypotheticals.”
In the end, Bernanke wished the U.S. economy would improve faster but in a difficult economic and political situation, “we did very good.”
What does the future hold for Bernanke? He will be writing more and try to explain more regarding the financial crisis. “For the future, I’m in a mode of reflection.”
Perhaps Yellen will attempt to make the Fed do more over the next four years. Instead of tapering, maybe the Fed, as has been hinted before by her, will end the taper and actually enhance its quantitative easing measures.
A lot of opponents of the Fed make the case that Bernanke made the situation far worse by distorting the markets rather than “communicating” to them. Also, expanding the money supply, artificially lowering interest rates to record-low levels and purchasing mortgage-backed securities didn’t assist in remedying any of the fundamental economic problems.