Recession like car wreck, Bernanke says
WASHINGTON — In his final public appearance as chairman of the Federal Reserve, Ben Bernanke took a moment to reflect on the 2008 financial crisis and compared it to surviving a bad car crash.
During an interview on Thursday at the Brookings Institution, Bernanke recalled some “very intense periods” during the crisis, similar to trying to keep a car from going over a bridge after a collision.
The government had just taken over mortgage giants Fannie Mae and Freddie Mac. Lehman Brothers had collapsed. He recalled some sleepless nights working with others to try to contain the damage.
“If you're in a car wreck or something, you're mostly involved in trying to avoid going off the bridge. And then, later on, you say, ‘Oh my God!' ” Bernanke said.
Bernanke will leave the Fed on Jan. 31, having served eight years as chairman. His successor, Janet Yellen, will take over on Feb. 1.
In his appearance, Bernanke defended the Fed's efforts during the crisis, which included significant purchases of Treasury bonds to push long-term interest rates lower and forward guidance to investors about how long the Fed plans to keep short-term interest rates near zero.
Critics have warned that those efforts pose great risks for higher inflation or financial market turmoil.
But Bernanke says there has not been a problem with inflation, which is running well below the Fed's 2 percent target.
Should inflation start to be a problem as the economy starts growing at faster rates, the Fed “has all the tools we need to manage interest rates” to keep inflation from getting out of hand, he said.
“Inflation is just not really a significant risk” from the bond purchases, Bernanke said.
Bernanke said the central bank is aware of the potential threat to financial market stability from its substantial bond holdings and is monitoring markets closely to spot any signs of trouble. He said this threat was the one “we have spent the most time thinking about and trying to make sure that we can address” should the need arise.
But he said any concerns about financial stability did not outweigh the need to keep providing support to the economy.
The Fed announced last month that it would slightly reduce the size of its bond purchases in January from $85 billion per month to $75 billion. And it said it would likely make further reductions if the economy keeps improving.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Yahoo investors losing patience with ‘star’ CEO Marissa Mayer
- Small stores take big gamble by not upgrading credit card readers
- Shopping beacons join list of ‘next big thing’ disappointments
- Amazon raises bar for other retailers with same-day delivery
- Covestro leader MacCleary finds stability amid change
- Many Black Friday deals not worth the hassle
- Not all in support of UAW contracts
- Nutritional supplement makers, led by GNC, want to create voluntary safety standards
- Union leaders warn Post-Gazette newsroom of possible layoffs
- Stocks finish flat before Thanksgiving holiday; energy firms give back some gains
- 3 startups want millennials to save money