In FED We Trust: Ben Bernanke's War on the Great Panic

Keynes once said that central bankers should strive to be as boring as dentists. In the past couple of years, central banking has certainly been less boring than dentistry. Observers and pundits were certainly not bored by Alan Greenspan, to whom George W. Bush bid farewell after his nineteen years of service by noting, quite accurately, that he was "the only central banker ever to achieve rock-star status". Neither Greenspan nor his successor Ben Bernanke were flamboyant characters, but they attracted a degree of public attention that underscore the importance of their role in the functioning of the US economy. And never was this role more important than during the great financial panic that forms the focus of David Wessel's book. As Bernanke commented, "We came very, very close to a financial meltdown, a situation in which many of the largest institutions in the world would have failed, where the financial system would have shut down, and in which the economy would have fallen into a much deeper and much longer and more protracted recession."The book has a strong behind-the-scenes flavor. There are lots of personal details and anecdotes on the main characters, which help to understand how they reacted in an unprecedented time of crisis. The author had extensive access to high ranking officials, including Bernanke, Paulson and Geithner, and interviewed many lower-ranking individuals "whose carriers would not be advanced by the disclosure of their names", as he puts in the acknowledgements section. Many stories or comments were not intended for the record, and there are several exclusive renderings that will change the public's perception of the crisis. Here are some examples:. Lehman Brothers could have been saved from bankruptcy on September 14, 2008, were it not for the stubbornness of the British Financial Services Authority. Paulson and Bernanke had found a British white knight as Barclays was ready to buy Lehman and to guarantee all of its liabilities. But stock-exchange listing rules required a shareholders vote and the FSA refused to grant a waiver. Barclays later bought pieces of Lehman at a much discounted price.. The US financial regulator slept while the fate of Bear Sterns was being decided. Christopher Cox, the former California congressman who was chairman of the Securities and Exchange Committee and ostensibly Lehman's regulator, wasn't privy to the 4:45 conference call that Geithner convened to settle the fate of the investment bank. Hours later, a SEC staffer sent plaintive email messages to the Treasury and the Fed, begging someone who had been on the call to contact Cox and fill him in.. Paulson convinced JPMorgan that it was paying too much, not too little, for Bear Sterns. JPMorgan's CEO was thinking of offering $4 or $5 for a share, but Paulson, who wanted Bear Sterns' shareholders to feel the pain, told him that his bidding price "sounded high" and talked him into reducing it to $2. The LA Galaxy soccer team signed David Beckham, the British soccer superstar, for a price higher than what JP paid for Bear.There are some passages that I found baffling. When he was chairing the Council of Economic Advisers, Bernanke had a discussion with President Bush on oil prices. The president was complaining that "speculators" were driving up the price of oil and making markets more volatile, which is a commonly held view. However Bernanke quietly but firmly disagreed, telling the president that "every study he knew suggested that speculators dampen, not amplify, the volatility of oil prices". Considering Professor Bernanke's academic credentials, I would be tempted to believe him. But then economists should make greater efforts at explaining to the public and to politicians why oil prices vary so widely and what role market actors play in oil price formation.Another surprising point, at least in retrospect, was the lack of international coordination on banking and financial issues that have a systemic impact beyond borders. Christine Lagarde, the French finance minister, learned about the collapse of Lehman in the press, like everybody else, and declared with much clearsightedness that the decision was "horrendous", "a genuine error". Conversely, the head of the French central bank didn't bother to call the US when it was discovered that a rogue trader at Société Générale had accumulated losses of $7 billion, sending big ripple effects on the markets when the positions were unwound. G7 meetings, where international coordination is supposed to take place, are seen by insiders as "mostly ritualized recitations of positions already expressed publicly". Paulson found these meetings tedious and unproductive, and generally used the word "G7" as a term of contempt. It was all the more surprising when a memo written by Bernanke to clarify his views became the focus of the discussion on the October meeting following the Lehman shock and found its way in the final G7 communiqué.The book's message, as stated on the cover, is that the Federal Reserve has become the fourth branch of government, a branch where unelected officials can spend up to $800 billion without democratic oversight or accountability. But reading the chapters makes it clear that the Fed has to obey many rules and regulations, and that legal constraints often hampered its capacity to react to the crisis. The Federal Reserve Board's chairman and the presidents of the Federal Reserve Banks also have to testify regularly before Congress, and judging by the way they are grilled by the chairs of the Senate Banking Committee or the House Financial Services Committee, these hearings are serious matter. They are also for the record, whereas the minutes of the Federal Open Market Committee are released only after five years. Future historians will be able to use these records to paint a fuller picture of the financial panic of 2008-2009. But there is no doubt that they will also use David Wessel's book as a reference to understanding what really did happen behind the scenes.

IN FED WE TRUST, by David Wessel, in the third exceptional book I have read about the recent financial crisis. Unlike TOO BIG TO FAIL and STREET FIGHTERS, IN FED is a more analytical, non-chronological, intensely thoughtful analysis of events leading up to the crisis as well as the crisis itself. We also learn a good deal not only about Bernanke but his predecessor, Alan Greenspan, as well.In addition, we learn a lot more about Timothy Geithner and Hank Paulson, the other two fascinating characters in this near-calamity.Wessel is excellent at explaining the intricacies of the complicated, innovative--but ultimately poisonous--instruments that were partially to blame for the meltdown, as well as in translating "FedSpeak" so that the reader understands concepts like the Fed's discount window, how interest rates reverberate throughout the economy, and how there were fundamental changes in the very structure of our financial system that were difficult even for bankers, economists and the best-educated politicians to decipher. What the Chairman of the Fed doesn't say is sometimes as important as what he does say. Bernanke is under the microscope, and this book explains what kinds of pressures are involved in his job.What I most appreciate about this book is that it does not endeavor to demonize any of the major participants. Wessel is for the most part sympathetic to the efforts and intentions of the major players, although he definitely pulls no punches when pointing out where mistakes were made. And there were plenty, to be sure. He eunerates them in considerable detail (including stupendous goofs by Greenspan).As a reader, I came away the feeling this was a very balanced, thoughtful and fair book. It also avoids the tawdly sensationalism and hysterical finger-pointing that pockmarks some of the other analyses of what occurred. Nor does it feel rushed, the way Gasparino's SELLOUT feels, or that there is some intense axe to grind, as disturbs some other potentially valuable works on this subject. Unlike some other books, this one seems focused rather than sprawling, cohesive rather than needled together with thread to meet a publishing deadline.This is an excellent book that strikes a nearly perfect balance between analysis and exposition. What it may lack in immediacy, it more than makes up for in depth.

Excellent book describing the career paths of Bernanke, Geithner, and Paulson, and the inner workings of The Fed, leading up to and during the financial crisis of 07-08.Unlike some of the reviews here, I found the author to be highly critical of Bernanke, but it is true, in the final analysis, almost on the last page, he comes out in Bernanke's support.No mercy for Greenspan though,and heres the contradiction at the books core.He tells us that Bernanke supported Greenspan early on and throughout Greenspans last days. Then he tries to make us forget that fact, and portrays Bernanke as a late entry who merely came in to clean up the mess.Like me, if you want to believe that Bernanke is a demon representing imperialism, debt slavery, and the NWO, this book is still a valuable and very interesting read.I for one was enlightened on how the Fed buys and sells bonds depending on how much money they want in the system. He tries to let Bernanke off the hook by claiming that it wasn't the Feds responsibility to know about the non banking financial institutions that largely led to the crisis.;its an argument I can't buy.I for one, although not being a Lyndon Larouche fan, DO remember Larouche and other way back when talking about the derivatives bubble and the housing crisis, so theres no way I believe that the nations top mainstream economists weren't aware of it,whether it was their job to be aware of it or not.Even I knew that interest rates were being held too low. I deliberately bought the cheapest house I could back in 2000, taking out only 105k, when offered 300. This book is a good starting place for those like myself who would learn of the financial systems inner workings, couple it like I di with Ron Paul's, End the Fed.

I guess the author was trying to make this book as light a read as he could for the lay person, like myself. It's still a bit heavy in places though. Luckily nowadays, I can ask my phone to explain meanings of words or phrases.Stick with it though, for a detailed insight into how the 2008 credit-crunch was managed, along with a breif history lesson by way of comparison with the great depression of the 1930s.I feel like I know a bit more about the world economy now, if only how complicated it is.

Very interesting an well written! provide a good insight on what has happened during the financial crisis and recognize who should get credits from rescuing the capitalism and acting on the best available information and tools at that time.

大恐慌研究に学者人生を捧げてきたベン・バーナンキ氏がFRB議長に就任し、何の運命でか大恐慌以来の金融危機に対処することになってしまった、さて、彼は「その時」どう行動したのか、という本。ご本人に取材して書き上げられている。冒頭FRB設立の歴史に触れているが、ほとんどはFOMCの様子が中心。FOMCの中心人物たちを「四銃士」と命名したり、バーナンキ氏の即断即決をヒロイックに描いて（そして実際にそれはヒロイックだった可能性はある）素人の興味をキープしようという努力はひしひしと感じるのだが、投資銀行の重鎮たち相手に賑々しくやっていたのは財務長官のポールソン氏と当時のNY連銀総裁のティモシー・ガイトナー氏の方で、バーナンキ氏側の話は読み物としてドラマチックだったりアクションがある訳ではない。政策金利決定の話なので業界関係者以外には実はピンと来ない話でもある。私もピンと来なかった。公定歩合とFF金利の違いは表面的にはボンヤリと把握してはいるが（多分）、その示唆するところは生々しくは分からないし。この時期に出前モンを食べながら夜中までオフィスにいてFOMCの発表を待っていた、というような方々には感慨深く読める一冊ではあるかもしれない。取り敢えず素人の感慨は、「中央銀行って超法規的に（←厳密にそうかは知らないが）ここまで出来ちゃうんだなー」とか「投資銀行はSECの管轄のはずなのにSECの影もカタチもないのがスゴイなー」だったりする。AIGの実態を知ってFRB関係者が卒倒せんばかりになり、バーナンキが「これほど腹の立ったことはない」と回顧するところは興味深かった。超巨大企業放し飼いの図、というのか。トリビアとしては、FRBが日銀との差別化を模索して「quantitative easing」を「qualitative easing」とか「credit easing」とか命名し直そうとして一般語に出来なかった、というはちょっとおかしかった。「ベン・バーナンキがヘリコプターに乗ってケチャップを買いに…」とやや不埒な心構えで読み出したのだが、「中央銀行」というミステリアスな権力機関を前に不可思議な気分で読み終わることになった。

Very good