Give the departing Federal Reserve chairman a medal for averting another depression.
As a professor of economics, Ben Bernanke was a student of the Great Depression. Little did he know eight years ago, when he became chairman of the Federal Reserve, that the job would involve a desperate scramble to avert another one.
Bernanke, who chaired his last Federal Open Market Committee meeting Wednesday and leaves office Friday, proved to be the right man at the right time — and a measure of how much that matters at the Fed, where even small actions affect the interest rates people pay, the fate of their investments and, most important, the stability of the financial system itself.
OPPOSING VIEW: Get ready for more turbulence
Bernanke did not get off to a very good start. He was slow to see the dark clouds gathering from the subprime mortgage excesses. But when the financial storm hit with full force in 2008, the unimposing academic — nominated by George W. Bush and reappointed by Barack Obama — acted aggressively and imaginatively to avert economic catastrophe.
With the economy cratering and credit freezing, Bernanke's Fed arranged shotgun weddings or takeovers for failing institutions. It opened its lending windows to blue-chip companies that couldn't get loans from traditional sources. And, along with the Treasury, it stepped in to stop a run on money market funds. At the time, the system was teetering at the very edge of collapse.
From there, Bernanke managed to deliver modest economic growth at a time when Congress was hell-bent on sabotaging it with tight fiscal policy and partisan gamesmanship.
After pushing short-term interest rates to near zero, the Fed embarked on a controversial policy of "quantitative easing," the virtual printing of money to buy mortgage bonds and U.S. Treasuries, a move that bolstered housing, stocks and the broader economy.
Along the way, Bernanke also made the Fed a more transparent institution, going on 60 Minutes and instituting regular news conferences.
Bernanke did all this amid a constant barrage of criticism from those who say his policies will stoke runaway inflation, or lead to a stock market collapse as stimulus unwinds. Maybe. But so far, it is his critics who look misguided.
The inflation rate, running about 1% in recent years, is below the 2% rate that the Fed sees as healthy. As for the market, it's unhappy lately about losing its steroids, but not yet to an abnormal degree.
Bernanke's successor, Janet Yellen, will have to navigate those waters. But even if there's a price to be paid, it won't be as high as suffering through the depression Bernanke worked to avert.
Bernanke's legacy, like that of any prominent government figure, won't be fully knowable for many years. His predecessor, Alan Greenspan, left office to widespread acclaim, only to see his reputation tarnished by the financial crisis that germinated on his watch.
Bernanke's reputation could take a similar hit. From today's vantage point, however, he looks like a clear candidate for the top ranks of the 14 men who have run the Fed in its 100-year history.
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