The Courage to Act: A Memoir of a Crisis and Its Aftermath
Ben S. Bernanke
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A New York Times Bestseller
An unrivaled look at the fight to save the American economy.
In 2006, Ben S. Bernanke was appointed chair of the Federal Reserve, the unexpected apex of a personal journey from small-town South Carolina to prestigious academic appointments and finally public service in Washington’s halls of power.
There would be no time to celebrate.
The bursting of a housing bubble in 2007 exposed the hidden vulnerabilities of the global financial system, bringing it to the brink of meltdown. From the implosion of the investment bank Bear Stearns to the unprecedented bailout of insurance giant AIG, efforts to arrest the financial contagion consumed Bernanke and his team at the Fed. Around the clock, they fought the crisis with every tool at their disposal to keep the United States and world economies afloat.
Working with two U.S. presidents, and under fire from a fractious Congress and a public incensed by behavior on Wall Street, the Fed―alongside colleagues in the Treasury Department―successfully stabilized a teetering financial system. With creativity and decisiveness, they prevented an economic collapse of unimaginable scale and went on to craft the unorthodox programs that would help revive the U.S. economy and become the model for other countries.
Rich with detail of the decision-making process in Washington and indelible portraits of the major players, The Courage to Act recounts and explains the worst financial crisis and economic slump in America since the Great Depression, providing an insider’s account of the policy response.
16 pages of photographs
a capitalist system, the market must be allowed to discipline individuals or firms that make bad decisions. Frank Borman, the former astronaut who became CEO of Eastern Airlines (which went bankrupt), put it nicely a quarter-century earlier: “Capitalism without bankruptcy is like Christianity without hell.” But in September 2008 I was absolutely convinced that invoking moral hazard in the middle of a major financial crisis was misguided and dangerous. I am sure that Paulson and Geithner agreed.
since if the borrower re-defaulted the lender would pocket the government guarantee payment and could still foreclose on the home. Fed economists proposed alternative plans, including variants of the FDIC’s IndyMac protocol, that they believed would achieve more sustainable modifications at lower cost to the government. We also suggested that the Fed and Treasury could create a new special-purpose vehicle to buy at-risk mortgages in bulk from lenders and investors. Under our plan, this new
messages. But in extreme forms, on either the left or the right, populism can also lead to cynical manipulation of legitimate public anger and to contempt for facts and logical argument. When these aspects of populism dominate political discourse, good governance is nearly impossible. I never worried particularly about my personal encounters with either Paul or Sanders. There was a refreshing purity to their views, which seemed often unaffected by real-world complexities. The principal
what level of employment policymakers thought they could achieve without generating inflationary price and wage increases. Ideally, the whole Committee would have agreed on the projections. Policy committees in several countries, the United Kingdom being one leading example, publish collective forecasts. But we could not count on the diverse (and geographically dispersed) Federal Open Market Committee, with its nineteen participants when all positions are filled, being able to agree on a single
new term. With Betsy’s nomination the exception, the Senate seemed to be creating a regrettable convention, that no one could be confirmed to the Fed’s Board in the last year to eighteen months of the president’s term. (In 1999, ahead of the 2000 presidential election, one of Chris Dodd’s Republican predecessors as Senate Banking Committee chairman, Phil Gramm, had blocked President Clinton’s nomination of Roger Ferguson to a second Board term. After the election, President Bush renominated him.)