I saw Ron Insana on CNBC yesterday say that anyone who thinks that Ben Bernanke didn’t single-handedly save us from the Depression doesn’t understand economics or the financial system. He went on to not explain what Bernanke actually did, outside of “saving us from the Depression,” and responded to the hosts’ questions about Bernanke failing to notice the housing bubble before it was too late, the proximate cause of the crisis, with a wave of his hand. The financial industry, and its journalists, seem to love to create totems, Great Man-Daddies who “save us” from things, and whose methods are so complex and mysterious that no mere mortal could understand their genius.
It is such belief that animates Time Magazine’s selection of Bernanke, “our mild-mannered economic overlord,” as Person of the Year.
He is not, in other words, a typical Beltway power broker. He’s shy. He doesn’t do the D.C. dinner-party circuit; he prefers to eat at home with his wife, who still makes him do the dishes and take out the trash. Then they do crosswords or read. Because Ben Bernanke is a nerd.
He just happens to be the most powerful nerd on the planet.
Bernanke is the 56-year-old chairman of the Federal Reserve, the central bank of the U.S., the most important and least understood force shaping the American — and global — economy. Those green bills featuring dead Presidents are labeled federal reserve note for a reason: the Fed controls the money supply. It is an independent government agency that conducts monetary policy, which means it sets short-term interest rates — which means it has immense influence over inflation, unemployment, the strength of the dollar and the strength of your wallet. And ever since global credit markets began imploding, its mild-mannered chairman has dramatically expanded those powers and reinvented the Fed.
Yes, the piece makes mention of the fact that Bernanke has critics across the political aisle, though they don’t pinpoint the criticism – that he provided trillions for banks but hasn’t felt any sense of urgency to fulfill one of the core missions of the Fed, to maximize employment, and indeed sees fit to encourage severe cutbacks in fiscal policy instead of the kind of stimulus needed to create jobs that the private sector is not.
But ultimately, Time chose Bernanke for the same reason Insana worshipped at his feet yesterday – that he’s the “world’s most important man in charge of the world’s most important economy,” that he had a history in Depressions so he knew how to avoid one, etc. To Time’s credit, they do cite that Bernanke didn’t see the Great Recession coming at all, but they are sufficiently charmed by the fact that his work to dig the nation out of the hole he helped create through negligence was top-rate. They barely even mention his role at the Council of Economic Advisers under George W. Bush, pushing the economic policies that created the disaster.
This paragraph sums up the tone of the Time article:
The Fed has become the new Trilateral Commission; no conspiracy theory is too far-fetched. There’s a vivid example on YouTube, a video titled “Florida Congressman Alan Grayson Laughs in Ben Bernanke’s Face — Priceless!” The rabble-rousing Democrat, wearing a shiny tie festooned with dollar bills, grills Bernanke (and mispronounces his name) about $553 billion worth of currency swaps the Fed made with foreign central banks that ran low on dollars during the credit crunch. This was textbook central banking: pumping liquidity into markets during a panic. The swaps were safe, interest-bearing loans and didn’t cost taxpayers a dime. But Grayson seems to think he’s uncovered a nefarious handout to shadowy foreigners. The laughter comes after he sneers that the dollar rose 20% during these swaps and asks if that’s a coincidence. Bernanke pauses, then replies, “Yes.”
Bernanke actually said that he didn’t know which foreign central banks got half a trillion dollars from the Fed, prompting the laughter. Grayson considers it no different than hedge funds speculating in international markets. And there are some foreign central banks out there – Greece springs to mind – which would be a bad play at the moment.
Also, Time, the dollar DEPRECIATED in value over that time, making the investment close to a $100 billion dollar loss, if we knew about the deal.
Bernanke told Grayson that the U.S. has so far profited from the exchanges because the foreign banks paid interest. But Grayson calls that claim “misleading” because the U.S. likely paid interest — probably higher interest — on its half of the deal and also lost as the currency fluctuated.
“This is the sort of thing that happens when he’s not subject to audit, he’s not subject to document requests, and you only get the pieces of the story that he wants you to hear,” said Grayson.
Time closes its article with the line “Let’s cut the guy some slack.” Certainly this is not the Person of the Year pick where it’s the most important man, for good or ill. They’re mesmerized by him, and they drop this one day before his confirmation hearing in the Senate Banking Committee.
Meanwhile, the public intuitively understands that Bernanke has been a force for Wall Street at the expense of the struggles of them and their neighbors.
The poll, commissioned by the Progressive Change Campaign Committee (PCCC) and Democracy for America, recently asked more than 800 voters a simple question: “Who do you think that Federal Reserve Chairman Ben Bernanke cares about more, Wall Street or Main Street?”
Forty-seven percent of respondents said Bernanke favors Wall Street; 20 percent said Main Street; the rest weren’t sure.
We’re not supposed to care, according to the traditional media, about the exploding Fed balance sheet, about their perverse relationship to the banks by having the chairs of their regional facilities selected by them, about their special purpose programs to buy up mortgage-backed securities, or paying banks interest on excess reserves (which gives the banks an incentive not to lend), or their impotent response to rising unemployment. Bernanke saved the world, and he’s a Master of the Universe, and he must be exalted.
That’s the message from Time Magazine today.