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A Fond Farewell To Fed Chairman Ben


Ben Bernanke steps down this week as chairman of the Federal Reserve. The new chair, Janet Yellen, will take over on Saturday. After a two-day meeting, the message today from Fed policymakers was simple: Stay the course. The Fed released a statement saying it will continue dialing-back its stimulus.

NPR's John Ydstie has more on that decision and Bernanke's legacy.

JOHN YDSTIE, BYLINE: Fed policymakers said they will reduce their monthly stimulus by another $10 billion. And they justified the move by noting that the economy is growing moderately and the job market is improving. But they indicated again that they'll keep short-term interest rates near zero, at least until the unemployment rate falls below six and a half percent.

It was Ben Bernanke's final meeting as chairman, and in assessing his legacy, it's useful to divide his tumultuous tenure into three periods, starting with the pre-crisis days of 2006 and 2007. During that period, the Bernanke Fed took a hands-off approach, says Princeton economist and former Fed vice chairman Alan Blinder.

ALAN BLINDER: The Fed basically did nothing in the early Bernanke days, just as it has done nothing in the Greenspan days, to curtail the crazy mortgage lending that was going on all over the country.

YDSTIE: And it was slow to reduce interest rates as the housing bubble burst. But, says Harvard economist Ken Rogoff, in the second act, Bernanke's response was masterful, as the financial system melted down in 2008.

KEN ROGOFF: Overwhelmingly, Ben Bernanke's most importance contribution is he steered us through the depths of the financial crisis, when it could have been really awful. It was bad but we could have experienced the Second Great Depression. There's no doubt about it.

YDSTIE: Rogoff says the creative ways Bernanke saved Wall Street banks, money market funds, and the commercial paper market that provides critical daily funding for U.S. companies, will be studied by economists for 100 years.

Blinder agrees Bernanke was very skillful during the crisis, with one exception. He says the Fed chairman should have done more to keep the big Wall Street bank Lehman Brothers from failing. Bernanke has been countering that criticism since Lehman's collapse, including in this "60 Minutes" interview from back in March of 2009.


YDSTIE: Bernanke said the Fed could only lend to firms that put up solid collateral and Lehman didn't have enough.

The Bernanke Fed's policies ultimately stabilized the financial system, but getting the basic economy back to normal remains a challenge. The Fed has tried to help stimulate the economy with its quantitative easing aimed at lowering long-term interest rates. Rogoff says the jury is still out on how successful that's been.

ROGOFF: You can certainly debate the quantitative easing. I mean I'm sort of the school they actually should have done more.

YDSTIE: Others say the Fed's stimulus efforts are dangerous and could produce financial bubbles and inflation. Bernanke responds that the policy has lowered interest rates and helped the housing and auto sectors recover. Meanwhile, inflation remains historically low and Bernanke says he doesn't see any bubbles developing.

In a public appearance recently at the Brookings Institution, Bernanke said his goal was to help Main Street, not Wall Street.

: We hope that as the economy improves, and as we tell our story, that people will appreciate and understand that what we did was necessary; that it was in the interest of the broader public. It was aimed at helping the average American.

YDSTIE: Given the challenges that Bernanke faced and the extraordinary policies he employed, it's likely his legacy will remain a topic of debate for years to come.

John Ydstie, NPR News, Washington.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

John Ydstie has covered the economy, Wall Street, and the Federal Reserve at NPR for nearly three decades. Over the years, NPR has also employed Ydstie's reporting skills to cover major stories like the aftermath of Sept. 11, Hurricane Katrina, the Jack Abramoff lobbying scandal, and the implementation of the Affordable Care Act. He was a lead reporter in NPR's coverage of the global financial crisis and the Great Recession, as well as the network's coverage of President Trump's economic policies. Ydstie has also been a guest host on the NPR news programs Morning Edition, All Things Considered, and Weekend Edition. Ydstie stepped back from full-time reporting in late 2018, but plans to continue to contribute to NPR through part-time assignments and work on special projects.