We have only had one worse financial crisis since 1913 - the Great Depression. The Fed famously blundered that one by tightening and thereby exacerbating the liquidity crisis at the time. Interest rates rose dramatically and squashed investment in a deeply depressed economy and the rest is economic history.
Paul Volcker admirably handled high inflation 1980-82 also by tightening. At that time it was appropriate so he gets honorable mention for curing a nagging problem created by Nixon, rising energy prices, and high wages.
Bernanke caught the perfect storm. At least $15 trillion in paper assets vanished in 2008. Large banks would not loan to other large banks overnight. LIBOR rose to ridiculous levels. The entire $2 trillion Commercial Paper market vanished. McDonalds and hundreds of other corporations could not make payroll. The Dow plunged 700 points a day some days. Bank of America and Citigroup were suspected to be insolvent. Millions of depositors would pull cash out of all banks while stalwarts like Wachovia failed.
And by summer 2009 all was repaired thanks to massive liquidity, TALF, TGLP, SCAP, TARP and other extraordinary programs that cost less than the mild S&L crisis of 1990ish.
WE ain’t out of the woods yet. Volker is still number one in my book. Give Bernanke another two decades of hindsight before we pass judgement.
Greenspan could have gone the distance if he had followed up on irrational exuberance with some real tightening. But no, the Asian crisis followed by the ruble meant he “had” to be overly accommodating, and then there was LTCB, and it just kept spiraling until the dot com had to be bailed out by homeowners refinancing to buy boats and other consumer crapola, until the greatest Ponzi scheme ended in tears.
He’s done well. He should buy more Treasuries, though - say, a couple trillion more. And then tell Congress to write it off the debt. Because he’s keeping them, forever.
To be honest I think he has been a disappointment. Yes he acted boldly at the height of the crisis in 2008 but one would hope any minimally competent central banker would do the same. What else was there to do but aggressively ease monetary policy? And certainly he had the political freedom to do it .
Since then he has shown too much tolerence for unacceptable levels of unemployment. There have been sporadic efforts at quantitative easing but never sustained enough to break the back of unemploment. You could argue that he doesn’t have a consensus at the FOMC but he certainly hasn’t been a dynamic leader bending opinion in his direction. Overall I think he has been fairly mediocre when much better was needed.
I think this postby Krugman about a recent speech by Bernanke captures the man:
Bernanke strikes me as someone who knows intellectually that he needs to be more aggressive but faces institutional and political head winds that he doesn’t have the stomach to fight and ends up taking only sporadic action. Definitely not a leader.