“Whatever it takes”
That was Federal Reserve Chairman Ben Bernanke’s vow as the worst financial panic in more than fifty years gripped the world and he struggled to avoid the once unthinkable: a repeat of the Great Depression. Brilliant but temperamentally cautious, Bernanke researched and wrote about the causes of the Depression during his career as an academic. Then when thrust into a role as one of the most important people in the world, he was compelled to boldness by circumstances he never anticipated.
The president of the United States can respond instantly to a missile attack with America’s military might, but he cannot respond to a financial crisis with real money unless Congress acts. The Fed chairman can. Bernanke did. Under his leadership the Fed spearheaded the biggest government intervention in more than half a century and effectively became the fourth branch of government, with no direct accountability to the nation’s voters.
Believing that the economic catastrophe of the 1930s was largely the fault of a sluggish and wrongheaded Federal Reserve, Bernanke was determined not to repeat that epic mistake. In this penetrating look inside the most powerful economic institution in the world, David Wessel illuminates its opaque and undemocratic inner workings, while revealing how the Bernanke Fed led the desperate effort to prevent the world’s financial engine from grinding to a halt.
In piecing together the fullest, most authoritative, and alarming picture yet of this decisive moment in our nation’s history, In Fed We Trust answers the most critical questions. Among them:
• What did Bernanke and his team at the Fed know–and what took them by surprise? Which of their actions stretched–or even ripped through–the Fed’s legal authority? Which chilling numbers and indicators made them feel they had no choice?
• What were they thinking at pivotal moments during the race to sell Bear Stearns, the unsuccessful quest to save Lehman Brothers, and the virtual nationalization of AIG, Fannie Mae, and Freddie Mac? What were they saying to one another when, as Bernanke put it to Wessel: “We came very close to Depression 2.0”?
• How well did Bernanke, former treasury secretary Hank Paulson, and then New York Fed president Tim Geithner perform under intense pressure?
• How did the crisis prompt a reappraisal of the once-impregnable reputation of Alan Greenspan?
In Fed We Trust is a breathtaking and singularly perceptive look at a historic episode in American and global economic history.
From the Hardcover edition.
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|Title of eBook: In FED We Trust|
|Release Date: 08-04-2009|
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|Publisher: Crown Publishing Group|
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In FED We Trust
Whatever It Takes
At the beginning of October 2008, after some of the toughest weeks of the Great Panic, the lines in Ben Bernanke’s face and the circles under his eyes offered evidence of more than a year of seven- day weeks and conference calls that stretched past midnight. Sometimes all that seemed to keep Bernanke going was the constantly restocked bowl of trail mix that sat on his secretary’s desk and the cans of diet Dr Pepper from the refrigerator in his office. But the balding, bearded chairman of the Federal Reserve managed a smile as he confided that he had a title for the book he would write someday about his watch as helmsman of the world economy: Before Asia Opens . . .
The phrase was a reference to the series of precedent shattering decisions that Bernanke and others at the Fed and Treasury had been forced to make with insufficient sleep and inadequate preparation on Sundays so they could be announced before financial markets opened Monday morning in Asia, half a day ahead of Washington and New York.
Before Asia Opens . . . was not a laugh line. The subprime mortgage mess was made in America, and that meant the U.S. government was forced to lead the cleanup. Ben Bernanke had more immediate power to do that than any other individual. The president of the United States can respond instantly to a missile attack with real bullets; he cannot respond instantly to financial panic with real money without the prior approval of Congress. But Bernanke could and did.
Yet the United States had become so dependent on the flow of money from abroad and the business of American financial institutions was so intertwined with those overseas that Bernanke didn̵...