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A few surprising things about Bernanke you don’t know

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The former chairman of the Federal Reserve who arguably saved the U.S. economy from another Great Depression is now a civilian, serving as a senior advisor to two big financial firms – PIMCO and Citadel – writing a blog and making appearances at corporate events.

At LPL’s national conference held in Boston this week, Ben Bernanke sat on stage for an interview with the firm’s chief investment officer, Burt White. He told a few funny stories — stories I’ve heard he’s told before — and answered questions about the economy and, of course, Fed policy. And in the course of an hour or so he revealed some things that may surprise you.


A desire for public service

The 9/11 attack on New York’s World Trade Center inspired Bernanke, then the chairman of Princeton’s economics department, to join the Fed. He wanted to get involved in public service and says, he asked himself: What is good about economics? His answer: to help people live better lives.

Political experience: Two terms on a local school board

A few months later Bernanke was called to the White House for an interview with President George W. Bush, who asked him whether he had any political experience. “Two terms on the Montgomery Township Board of Education” in New Jersey, Bernanke answered. That was enough for Bush, who nominated Bernanke to be a member of the Federal Reserve Board. Once confirmed, Bernanke told his dean at Princeton that he’d be back in two years. “I was an academic lifer.”

Bernanke stayed on as a governor on the Fed board until Bush appointed him chairman of the Council of Economic Advisers, which was apparently a tryout for his role as chairman of the Federal Reserve. About six months later, Bush nominated him to chair the Federal Reserve Board.


Mistakes were made

Although Bernanke is given a lot of credit for preventing the Great Recession of 2007–2009 from turning into the Great Depression, which he studied as an academic, he didn’t recognize the dangers early on.

On March 28, 2007 he testified before the Joint Economic Committee in Congress that despite turmoil in the subprime mortgage market, “the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.”

By that time the mortgage giant Freddie Mac was no longer buying the most risky subprime loans, subprime mortgage lender New Century Financial was on the verge of bankruptcy and mortgage foreclosures were rising rapidly.

“Not my best call,” Bernanke told the LPL audience. “We didn’t understand that financial institutions around the world were much more exposed to losses than we and they thought.”

Dealing with Congress

Bernanke says he testified 79 times before Congress during his eight years as Fed chairman. That’s almost 10 times a year. Given that Congress is in session an average 145 days a year, that’s testifying about every 15 days on average.

But not all the dealings with Congress were public. Before the U.S. government took control of AIG, a giant insurer on the verge of collapse from selling credit-default swap contracts whose debt was owned by many banks and mutual funds, Bernanke and then-Treasury Secretary Hank Paulson met with a group of lawmakers.  At the end of the meeting, said Bernanke, one senior senator thanked him and Paulson for coming and told them, “‘Understand that nothing you heard constitutes congressional approval; this is your decision. This is your responsibility.’ ”

About his Washington experience, Bernanke said, “As bad as you think public policy is, it’s worse.” But he’s not bitter or surprised.  “If you’re working on policy you have to be scrutinized… ‘It is important for all policymakers to explain why they’re doing what they’re doing and to be ready to accept criticism and scrutiny,” said Bernanke. He added that those who aren’t comfortable with that shouldn’t be involved in public policy.


Bernanke served two terms as Fed chairman under two presidents. (President Barack Obama renominated him in early 2010). He left after his last term ended in early 2014.

“It was enough,” said Bernanke, who said he had told Obama he wasn’t interested in another term. “I’m glad to be a civilian again.” Now when he picks up a newspaper and reads that there’s a serious problem, he said he “hopes someone does something about it.”


At his going-away party at the Fed, Bernanke said the staff presented a baseball card with his picture on it and the stats of his Fed career, including the number of times he went before Congress.

Turns out Bernanke loves baseball and is a regular at Washington Nationals games. “All economists love baseball statistics, which go back to the 1880s,” he said.

And he seems to love the story he tells about talking with Nationals right fielder Jason Werth at the ballpark. When he was taken around by former manager Davey Johnson to meet the players, Werth, who’s 6-foot-6 and towers over the Fed chairman, asked, “ ‘What’s the deal with QE? “ referring to the Fed’s quantitative easing policy of buying U.S. Treasuries and mortgage-backed securities to stimulate growth. The LPL audience laughed.

Bernanke also recalled his lunch with actor Paul Giametti, who played Bernanke in the HBO movie “Too Big to Fail,” about the financial crisis. They talked about baseball because Giametti’s father, Bart, had been baseball commissioner.


The Jason Werth story wasn’t the only one that got laughs at the LPL conference.  Here’s another: Bernanke recalled the criticism the Fed received including one from Rep. Ron Paul, R-Texas, who also advised people to invest in gold because Fed policy would lead to runaway inflation. “How has that worked out for you?” The audience clapped.


Hundreds of books have been written about the financial crisis, including books by two Treasury secretaries, who are members of the Federal Reserve Board. Now Bernanke, probably the single most important policymaker during the crisis, has his own. “The Courage to Act: A Memoir of a Crisis and Its Aftermath” is scheduled to be released on Oct. 5.