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Lehman 10/5

Bernanke Book

Ben Bernanke: More execs should have gone to jail for causing Great Recession
Oct 5, 2015 | USA Today

On USA TODAY's Capital Download, former chairman of the Federal Reserve Ben Bernanke tells Susan Page that more corporate executives should have gone to jail for their misdeeds.
Bernanke wanted Wall Street's worst in jail
Oct 4, 2015 | CNN Money

Bernanke advocated for Wall Street's bailout in 2008 during the financial crisis when he led the Federal Reserve. He still thinks the bailout was the right call, but looking back he wishes more corrupt Wall Street bankers who helped bring on the crisis went to jail.
Ben Bernanke: More bankers deserved to be jailed for financial crisis
Oct 4, 2015 | Fortune

But he defends the bailout. “We could’ve gone into a 1930s-style depression,” says the former Fed chairman.
Bernanke lets loose on AIG execs in memoir: I seethed
Oct 5, 2015 | Politico

Ben Bernanke’s new memoir shows a side of the Federal Reserve chairman not normally shared—emotional.
Ben Bernanke relives the 'terrible, surreal moment' the US tried to save Lehman Brothers
Oct 1, 2015 | The Daily Telegraph

Ben Bernanke has used his autobiography to reveal the "terrible, surreal moment" when regulators desperately tried to save the investment bank Lehman Brothers in 2008.

Bernanke Book

Ben Bernanke: More execs should have gone to jail for causing Great Recession

Oct 5, 2015 | USA Today

This season, Ben Bernanke was able to sit through an entire Nationals game.
During the financial meltdown in 2008, the then-chairman of the Federal Reserve would buy a lemonade and head to his seats two rows back from the Washington Nationals dugout, a respite from crisis. But often he would find himself huddling in the quiet of the stadium's first-aid station or an empty stairwell for consultations on his BlackBerry about whatever economic catastrophe was looming.
"I think there was a reasonably good chance that, barring stabilization of the financial system, that we could have gone into a 1930s-style depression," he says now in an interview with USA TODAY. "The panic that hit us was enormous — I think the worst in U.S. history."
With publication of his memoir, The Courage to Act, on Tuesday by W.W. Norton & Co., Bernanke has some thoughts about what went right and what went wrong. For one thing, he says that more corporate executives should have gone to jail for their misdeeds. The Justice Department and other law-enforcement agencies focused on indicting or threatening to indict financial firms, he notes, "but it would have been my preference to have more investigation of individual action, since obviously everything what went wrong or was illegal was done by some individual, not by an abstract firm."
He also offers a detailed rebuttal to critics who argue the government could and should have done more to rescue Lehman Brothers from bankruptcy in the worst weekend of a tumultuous time. "We were very, very determined not to let it collapse," he says. "But we were out of bullets at that point."
Still, he does acknowledge some missteps by the Fed. Analysts were slow to realize just how serious the economic downturn would become, and he faults himself for not doing more to explain to Americans why it was in their interests to rescue the financial firms that had helped cause it.
"Every time I saw a bumper sticker which said, 'Where's my bailout?' it hurt," he told Capital Download.
That is a rare admission of emotion. Former Treasury Secretary Tim Geithner once described Bernanke as the Buddha of central banking, his demeanor impassive even during disaster. In the 2011 HBO movie Too Big To Fail, actor Paul Giamatti won a Screen Actors Guild award for his portrayal of the Fed chairman as restrained in all things, from his soft-spoken speech to his choice of oatmeal for breakfast. In comparison, Treasury Secretary Hank Paulson seemed almost volcanic.
Not that Bernanke, who retired from the Fed last year, would know about that. He hasn't seen the movie. "I read the book, but I like to say I saw the original, so it wasn't necessary to see the movie," he says.
Will he ever watch it? "If there's nothing else on," he shrugs, "maybe so."
Bernanke has been interested in the Great Depression since his grandmother told him stories about it from her front porch in Charlotte, N.C., during quiet summer evenings. Her family had been living in Norwich, Conn., where some children went to school in worn-out shoes or even barefoot because their fathers lost their jobs when the shoe factories closed. That meant their families didn't have enough money to buy shoes — which presumably would have kept the factories in business and their fathers employed.
"Even a small boy could see the paradox," he says.
He grew up in tiny Dillon, S.C., a farming town on the Little Pee Dee river. His mother taught school. His father was a pharmacist in the drugstore his grandfather had opened after moving there from New York City in the wake of the stock-market crash of 1929. Bernanke went to Harvard, earned his doctorate at MIT, taught at Stanford and ended up heading the economics department at Princeton.
President George W. Bush named Bernanke to be a governor on the Fed in 2002, then appointed him to head the White House Council of Economic Advisers in 2005. The next year, Bernanke was back at the Fed, succeeding Alan Greenspan as chairman.President Obama appointed him to a second four-year term as chairman in 2010.
Balding and with a neatly trimmed beard, Bernanke has never lost his professorial air and modest mien. He still lives on Capitol Hill with his wife, Anna, who founded the non-profit Chance Academy to help city kids who are being home-schooled. He walks the dog, does crossword puzzles and reads three or four books a week on his Kindle — books of all sorts. In the previous week or so, that included a new annotated edition of Alice in Wonderland; Beyond Words, on the social lives of animals; and the latestLee Child thriller, Make Me.
His scholarly interest in the forces that caused and prolonged the Great Depression wasn't the reason Bush picked him to come to Washington, but it turned out to be serendipitous.
"When I became chairman, the first thing I did was ask the staff was to dust off the playbooks and see what we had and what the planning was," he said in an interview at the Brookings Institution, the Washington think tank where he is now a distinguished fellow. At the time, few saw a financial calamity on the horizon. "Once we identified what was going on and understood how to take into account (the fact that) we were in a very different financial system than we had been 100 years earlier, that history was very helpful for me in thinking about having to address the panic."
He wrote the memoir by collecting and reviewing the emails he sent and received during the crisis, perhaps 150 of them a day, a real-time reminder of what was happening. (As chairman, he used a Fed email account but with a pseudonym, Edward Quince, a name that was then listed in the Fed phone book as a member of the security team.)
It reminded him of World War II's North Africa campaign that author Rick Atkinson detailed in An Army at Dawn.
"The main impression you get is how complex and chaotic warfare is, how many things go wrong, how many things fail to work the way you expected them to," he says. "At the end, of course, what counts is ... did the allies succeed in taking North Africa? Looking back on the financial crisis and the period after the crisis, it was a very chaotic period; lots of things went wrong. But I guess in the end we obviously did stabilize the system and the U.S. economy is now growing."
The decision about whether to prosecute individuals wasn't up to him, he says. "The Fed is not a law-enforcement agency," he says. "The Department of Justice and others are responsible for that, and a lot of their efforts have been to indict or threaten to indict financial firms. Now a financial firm is of course a legal fiction; it's not a person. You can't put a financial firm in jail."
He would have favored more individual accountability. "While you want to do everything you can to fix corporations that have bad cultures and encourage bad behavior — and the Fed was very much engaged in doing that — obviously illegal acts ultimately are done by individuals, not by legal fictions."
What the Fed was focused on was trying to prevent the Great Recession from turning into another Great Depression. His academic studies concluded that the Fed's failure to act more decisively and creatively worsened that crisis nine decades ago. This time, he was determined take any steps he could fathom to try to keep a devastating downturn from getting even worse. That approach prompted Time Magazine in 2009 to name him "Person of the Year" and "the most powerful nerd on the planet."
One early step, in 2008, was to push interest rates nearly down to zero — which is where they have stayed ever since. The current Fed, led by successor Janet Yellen, last month pulled back from indications it was ready to begin raising them again. "We didn't think it would take that long," Bernanke says — that seven years later, interest rates would still be near zero.
Is it time to raise them?
"You know, the last thing I want to do is second-guessing Janet Yellen, who I think is doing a really good job and making some tough calls. But clearly there are some tough decisions to make on how to manage policy at this point, and this is a very important juncture."
Bernanke loves baseball for the same reason he chose economics as his profession: the power and clarity of numbers.
"The numbers are so concrete," he says in a conversation in the Nats press box before a game against the Miami Marlins on a sunny afternoon last month. "In baseball, you've got all the data going back to the 1880s for all the players, and if you understand how to use numbers, it makes it come alive."
He watches the game with the same impassive manner and attention to detail that must have marked his tenure at Fed deliberations. Wearing jeans and a worn blue-gray Nats cap, he doesn't shout and rarely cheers, but he does politely clap when a Nats player gets a hit or the team leaves the field.
"He won't swing," Bernanke predicts as Yunel Escobar faces a 3-2 count. Escobar, who led the league in batting into double plays, has been excoriated in baseball blogs in recent days for doing just that even though star hitter Bryce Harper would have been up next. This time, as predicted, Escobar doesn't swing and gets a walk.
"It's time for Harper to get something," Bernanke says in the next inning as the right-fielder comes up to bat. Done: He hits a home run.
In 2012, in a favorite moment as Fed chairman, Bernanke was invited to watch the Washington Nationals' batting practice on the field before a game. He was surprised when right-fielder Jayson Werth asked him, "So what's the scoop on quantitative easing?" the Fed's effort to boost the economy by pumping in new money. Bernanke writes, "Then I recalled that Werth was playing under a seven-year, $126 million contract, which gave him some interest in financial matters."
At this game, as Werth heads into the dugout after the top of the first inning, he gives Bernanke a tip of his cap.
Bernanke beams.
Oh, and the Nats won, 5-2.

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Bernanke wanted Wall Street's worst in jail

Oct 4, 2015 | CNN Money

Bernanke advocated for Wall Street's bailout in 2008 during the financial crisis when he led the Federal Reserve.
He still thinks the bailout was the right call, but looking back he wishes more corrupt Wall Street bankers who helped bring on the crisis went to jail.
"You can't put a financial firm in jail," Bernanke told USA Today in an interview Sunday. "Everything that went wrong or was illegal was done by some individual, not by an abstract firm...there should have been more accountability at the individual level."
Bernanke left the Fed more than a year ago and his memoir, The Courage to Act, comes out this week. It is supposed to detail life inside the Fed during the worst crisis since the Great Depression.
Bernanke and the Fed drew lots of criticism from the media and general public for bailing out Wall Street at a time of great income inequality, rising unemployment and a collapsed housing market.
On Sunday, Bernanke defended his bail out decision. He also said he wished Lehman Brothers, which collapsed into bankruptcy and was portrayed as a poster child of Wall Street corruption, could have been saved.
"If we hadn't prevented the collapse of Wall Street, then Main Street would've collapsed as well," Bernanke said.
On Lehman: "We were very very determined not to let it collapse," Bernanke said. "Unfortunately, the potential buyers for Lehman, Bank of America and Barclays, decided against buying the company because it had so much red ink on the balance sheet."
Bernanke did admit one mistake during his tenure as Fed chair: not explaining the Fed's actions to ordinary Americans.
He says that the public outcry over the Fed's decision to bail out Wall Street stems from a misunderstanding and that the Fed did not do a good job clarifying its actions.
"We were so focused on trying to fix the problems, stabilize the system," Bernanke said. "We didn't have the time or the energy to really explain to the public to the extent that we should have perhaps exactly what we were doing, why were doing it, why it was essential for the health of the economy."
"Even today, there's still a lot of people who, I think, misunderstand what we did and why we did it..there's still hostility towards the Federal Reserve, politically."
Coincidentally, Bernanke's book comes at a very important time for the Fed. Its committee, led by Bernanke's hand-picked successor, Janet Yellen, could raise interest rates for the first time in almost a decade. In the interview, Bernanke didn't comment much on the Fed's looming rate hike decision.
Bernanke put the Fed's key interest rate at zero in December 2008 to reboot the U.S. economy and housing market. Being at "zero bound" is considered an emergency level and some argue the U.S. economy is no longer in a crisis, nor should interest rates.
Bernanke also started a massive bond-buying program to stimulate the economy called quantitative easing, or QE.
The stimulus plan -- which ended last October -- sparked a 6-year bull market in American stocks and the U.S. economy has gradually improved. The unemployment rate peaked at 10% in 2009 and today it is 5.1%.
However, many Americans haven't benefited much from the economic recovery because of stagnant wage growth. The Fed and Bernanke have been criticized by some for exacerbating income inequality, one of America's biggest economic issues. The basic idea is that the Fed helped Wall Street bankers get richer while everyone else had to suffer through tough times.
Bernanke, who grew up in rural South Carolina, rejects any notion that he wanted to bail out Wall Street. He argues he had to do it to prevent an even worse economic downturn.
"I certainly was not eager to bail out Wall Street," Bernanke said. "We knew that if the financial system collapsed, the economy would immediately follow."

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Ben Bernanke: More bankers deserved to be jailed for financial crisis

Oct 4, 2015 | Fortune

Don’t expect Ben Bernanke to have a lot of nice things to say about Wall Street bankers in his upcoming memoir, which comes out this week. In a wide ranging interview with USA Today, the former chairman of the Federal Reserve says more of the bankers and corporate executives who helped cause the financial crisis should be in jail.
He says the Department of Justice focused too much, in the wake of the meltdown, on sanctioning financial firms, and getting large fines. He said there wasn’t enough effort put into punishing individuals.
“It would have been my preference to have more investigation of individual action, since obviously everything what went wrong or was illegal was done by some individual, not by an abstract firm,” Bernanke told USA Today.
There has been a vigorous debate since the financial crisis whether what lead to economic meltdown was wrongdoing or just general stupidity. So it is interesting that someone so close to the action would go with the former. At one point in the interview, which the USA Today has posted online, Susan Page asks Bernanke if more bankers should have gone to jail.
“Yeah, I think so,” Bernanke replies. But Bernanke says the Fed didn’t have the power to jail anyone. That’s why he says the fault lies with the Justice Department. But that’s not really fair. Bernanke could have had his regulators focus more on the misdeeds of individuals, and then used that evidence to pressure the DoJ to act. But there is no indication the Fed did that under Bernanke.
Bernanke spends much of the interview, as he has done in the past, defending the extraordinary actions of the Fed in the wake of the financial crisis, and the bailout in general. Bernanke says that “there was a reasonably good chance that, barring stabilization of the financial system, that we could have gone into a 1930s-style depression.” Moreover, he says that the worst part of the crisis was so-called “Leman Weekend,” the weekend that the federal government allowed investment bank Lehman Brothers to fail. “We were very, very determined not to let it collapse,” he tells Page. “But we were out of bullets at that point.”
The memoir, The Courage to Act: A Memoir of a Crisis and its Aftermath, is due for publication on Tuesday by W.W. Norton & Co., and while it focuses mostly on the events of the financial crisis, it also includes personal anecdotes from before Bernanke’s time at the Fed, dating as far back as his childhood in a small town in South Carolina.

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Bernanke lets loose on AIG execs in memoir: I seethed

Oct 5, 2015 | Politico

Ben Bernanke’s new memoir shows a side of the Federal Reserve chairman not normally shared—emotional.
The longtime academic turned financial-crisis-fireman lets loose on the Wall Street executives he was forced to essentially bail out as he tried to keep the world economy back from the brink of collapse.
“I kept my emotions in check and tried to view the situation analytically, as a problem to be solved. But once I fully understood how irresponsible (or clueless) AIG’s executives had been, I seethed,” Bernanke wrote about dealing with the downfall of the American International Group, which eventually received almost $185 billion in various forms of federal aid.
The book “The Courage to Act: A Memoir of a Crisis and Its Aftermath,” which was obtained by the Associated Press, is a 600-page reflection on the 2007-2009 crisis that suddenly thrust economic leaders around the world into an all-out panic mode, cobbling together solutions to prop up many of the world's largest financial institutions.
Bernanke described the failed attempts to save investment bank Lehman Brothers in 2008 as a “terrible, surreal moment.”
“We were staring into the abyss,” he said about the negotiations.
He also notes that the taxpayer bailouts were widely unpopular, but according to the AP, the book becomes somewhat of a defense of the practice and the economic rehabilitation program.
But Bernanke shares some lighter moments too.
He said when things got tough, he looked at a quote from Abraham Lincoln that the Fed’s parking-garage manager had given to him. “If I were to try to read, much less answer all the attacks made on me, this shop might as well be closed for any other business,” it started.
In 2012, when then-Texas Gov. Rick Perry was campaigning for president, he called the Fed’s practices “almost treasonous.” Perry said if Bernanke continued to print more money “we would treat him pretty ugly down in Texas.”
Bernanke made it a point to travel to Texas after Perry’s predictions where he was happy to report people did not treat him “ugly.”

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Ben Bernanke relives the 'terrible, surreal moment' the US tried to save Lehman Brothers

Oct 1, 2015 | The Daily Telegraph

Ben Bernanke has used his autobiography to reveal the "terrible, surreal moment" when regulators desperately tried to save the investment bankLehman Brothers in 2008.
"We were staring into the abyss," the former Federal Reserve chairman writes of the tense negotiations, led by Timothy Geithner, then head of the New York Fed, and Henry Paulson, then Treasury secretary.
Regulators hoped to find a buyer for Lehman and avert what would become the largest bankruptcy in US history, which ignited the worstfinancial crisis since the Great Depression.
A "blur" is how Mr Bernanke describes the events.
Mr Bernanke recalls the episode in his memoir, The Courage to Act: A Memoir of a Crisis and Its Aftermath, which is due to be published Monday.
Top executives of major banks took part in the marathon talks with regulators. Mr Bernanke followed the talks from his Washington office, conferring on speaker phone with officials in New York, munching on sandwiches and taking catnaps on the burgundy leather sofa in his office.
"All we can do is put foam on the runway," Mr Bernanke quotes Mr Geithner as saying, describing the effort to prevent a fire after a jetliner crash-lands.
Mr Bernanke's memoir, which he began after leaving the Fed in February 2014, revolves around the financial crisis, during which the US government took over mortgage giants Fannie Mae and Freddie Mac and provided hundreds of billions in aid to the country's biggest financial institutions.
He notes that the taxpayer-provided bailouts were widely unpopular. He would wince, he said, when he saw bumper stickers saying, "Where's my bailout?"
But the book amounts to a defense of the bailouts and the Fed's rescue programme for the economy. Late in 2008, the Fed cut its key short-term rate to a record low near zero, where it remains today, to support the economy. It also launched a bond-buying programme to try to drive down long-term borrowing rates.
Mr Bernanke argues that without the government's extraordinary assistance, the Great Recession, as severe as it was, would have been worse.
"The journey was nerve-wracking," he writes. "But most of my colleagues and I were determined not to repeat the blunder the Federal Reserve had committed in the 1930s when it refused to deploy its monetary tools to avoid the sharp deflation that substantially worsened the Great Depression."
"If I were to try to read, much less answer all the attacks made on me, this shop might as well be closed for any other business"The Abraham Lincoln quote Bernanke kept next to his computer screen
Mr Bernanke says the Fed's key goals were to lower interest rates to help the economy, unfreeze credit in the banking system, rescue major financial firms and conduct "stress tests" of the biggest banks to reassure investors.
The book, tracing Mr Bernanke's life from his small-town roots in Dillon, South Carolina, to Harvard and Princeton universities to chairman of the Fed, reveals:
Growing up in Dillon, the son of the town's pharmacist, Mr Bernanke describes himself as "bookish and shy and often on my own". As a Jew, Mr Bernanke said he was something of an outsider. Several times, he writes, elementary school classmates asked "quite innocently, I believe" whether he had horns. The real prejudice in town, he says, was directed at African Americans.
Accepted to Harvard, he felt academically unprepared and failed his first physics midterm [test]. Interested in maths, he realised he couldn't compete with Harvard's top students and made a "last-minute decision" to take an introductory economics class taught by Martin Feldstein. He was soon hooked.
As a graduate student in economics at the Massachusetts Institute of Technology, Mr Bernanke met his wife, Anna, on a blind date — a spaghetti dinner followed by pingpong — after being introduced by friends who felt they were both "nerdy".
During his darker days during the economic crisis, Mr Bernanke found solace in a quotation from Abraham Lincoln given to him by the Fed's parking garage manager. Written on a card and placed next to his computer screen, it began, "If I were to try to read, much less answer all the attacks made on me, this shop might as well be closed for any other business".
Recounting the frenzied deliberations as the Fed grappled with the collapse of giant insurer American International Group, Mr Bernanke says: "I kept my emotions in check and tried to view the situation analytically, as a problem to be solved. But once I fully understood how irresponsible (or clueless) AIG's executives had been, I seethed." AIG eventually received nearly $185bn in federal aid.
During the crisis, Mr Bernanke, a baseball fan, sometimes sought refuge at Washington Nationals games. But his cellphone kept ringing. He once took a call at the stadium's first-aid station, speaking softly into his phone as "two nurses watched me curiously".
After being tapped by President George W Bush to serve on the Fed's board, Mr Bernanke, a Republican, eventually became turned off by political parties. He now regards himself "a moderate independent, and I think that's where I'll stay".

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