Thursday, December 17, 2009
Ben Bernanke: Man Of The Year
Ben Bernanke is TIME magazine's Man Of The Year. Well, that is an interesting pick, isn't it. The Chairman of our central bank Man Of The Year? Why?
Writing about monetary policy and the tools of monetary policy reminds me a lot of when I worked in bank trust departments many years ago and tried to explain monetary policy to the men and women I worked with. It was if I was speaking in Hebrew, which I do not speak, because they did not really understand a word I was saying. Back then it was Paul Volcker, today it is Ben Bernanke. Where do I start?
Running a central bank is quite a challenge even if your own country does everything right in the first place. Dealing with other central banks around the world is not a walk in the park. But, when you have your own politicians throwing sand, gravel and pieces of glass into the batter, the bread you come out with can be difficult to digest.
Some of our politicians think they understand the role of a central bank, but from their comments criticizing Chairman Bernanke, it is quite clear to me that they don't have a clue what his job entails. The former Chairman of the Federal Reserve Bank, Alan Greenspan, was in the position long enough to shoulder some of the blame for the financial crisis and the meltdown of Wall Street. Alan Greenspan has now gone on the record as saying he made some mistakes. His biggest mistake was in thinking that banks and Wall Street would conduct themselves in their own long term self interests. That proved not to be the case. Banks and Wall Street need to be controlled by regulations much in the same way an NFL football game needs to be controlled with yellow flags on a Sunday afternoon.
Bernanke walked into a building on fire and ready to collapse, and to his credit, did not do a bad job of putting out the fire and supporting the building even though much of the structure had been badly damaged. For this, I think TIME magazine made him Man Of The Year. Keeping the economy of the United States from falling into pure hell while the financial sector was in serious trouble, took a lot of smarts. Why? Because, he really did not have the tools to do what he did. He just did them anyway. He performed open heart surgery on the banking system with a fountain pen.
Paul Volcker will always be to me the guy who saved this country back in the late 70s and early 80s. The fact that the Obama administration does not use him more is troubling to me. He is not allowed to appear on any of the Sunday morning network news programs, and that in itself tells me something. I would like to hear from Paul Volcker and hear what he has to say. I have heard from Geithner and Summers enough.
We are not out of the woods yet. Banking and Wall Street are headed back down the same road, and I am not speaking in Hebrew.