In today's launch event for the Hutchins Center on Fiscal and Monetary Policy, Federal Reserve Chairman Ben Bernanke, in one of his last public appearances as Fed chair, reflected on his eight years at the helm of the central bank, explaining his response to the 2008 financial crisis and beyond. He noted the need for independence of the Federal Reserve from political pressures and when asked if he was worried about political backlash against the Fed he said:
Well, first of all, it wasn't really a surprise. ... If you think about the 1930s we had exactly the same kind of reaction. In fact it was much more intense. ... And of course Roosevelt, what he argued was that the strong actions he was taking were about saving capitalism essentially.
The Fed was created to address financial panics and its independence and its ability to act quickly is a key feature of what the Fed is about. And if we had not done that and if the financial system had imploded and the economy had plunged into even a deeper depression, I think the populist reaction would have been pretty bad as well. So we were kind of stuck one way or the other.
So, we did the right thing, I hope, we tried to do the right thing. And there certainly has been pushback. We hope that as the economy improves and as we tell our story and as more information comes out about why we did what we did … that people will appreciate and understand that what we did was necessary, that it was in the interest of the broader public, it was a Main Street set of actions aimed at helping the average American. And, as time passes and that becomes clearer, I'm hopeful that these political concerns will wane.
The reason the Fed is independent is so that it can take emergency actions, or any other policy actions … independent of short-run political pressures. And the day that we allow those short-run political pressures to make us do something which is not the right thing for the economy, then our independence at that point is effectively gone.
Chairman Bernanke also expressed "some frustration" that "we've had these periods of fights over the debt limit, and things of that sort. And I think those things have caused problems for the economy. They've hit confidence; they certainly have prevented more positive, constructive action on the part of the government to address some of these concerns. In terms of unemployment for example."
Chairman Bernanke engaged in the wide-ranging discussion with Brookings Trustee Liaquat Ahamed, who is also former CEO of Fischer Francis Trees and Watts, Inc.; a Pulitzer Prize-winning author of Lords of Finance: The Bankers Who Broke the World.
Get more information about the three papers released at today's launch event, and information about the expert panel discussion that preceded Chairman Bernanke's remarks.
Event audio and video are also available.