Ben Bernanke

Ben Bernanke is an American economist and one of three economists to be awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2022. He has held positions as a professor of economics at Stanford University and Princeton University and has served as a visiting professor at New York University and Massachusetts Institute of Technology (MIT). He has served on the Board of Governors of the United States Federal Reserve and as a chairman of the President's Council of Economic Advisers. Bernanke worked as the Chairman of the Board of Governors of the U.S. Federal Reserve, succeeding Alan Greenspan. He has worked as an editor of the American Economic Review.

Benjamin Shalom Bernanke was born on December 13, 1953, in Augusta, Georgia. He grew up in Dillon, South Carolina. His father worked as a pharmacist, and his mother worked as a teacher. Bernanke attended Harvard University, where he graduated summa cum laude in economics in 1975. He then pursued a Ph.D. from the Massachusetts Institute of Technology, which he was awarded in 1979.

After graduating MIT, Ben Bernanke received his first professorial appointment at Stanford University, where he was an assistant professor of economics at the Graduate School of Business from 1979 to 1983. In 1983, he served as an associate professor of economics at Stanford University until 1985. In 1985, he moved to Princeton, where he held the position of a professor of economics and public affairs. From 1989 to 1990, he served as a visiting professor of economics at Massachusetts Institute of Technology. In 1993, he served as a visiting professor of economics at New York University.

From 1994 to 1996, Bernanke was the Class of 1926 Professor of Economics and Public Affairs and the Howard Harrison and Gabrielle Snyder Beck Professor of Economics and Public Affairs. From 1996 to 2002, he served as the chair of the Economics Department at Princeton University.

Before being appointed to the position of chairman of the Board of Governors in January 2006, Bernanke served the Federal Reserve System ("the Fed") in several roles, including as a member of the Board of Governors from 2002 to 2005; a visiting scholar at the Federal Reserve Banks of Philadelphia from 1987 to 1989, Boston from 1989 to 1990, and New York from 1990 to 1991, and again from 1994 to 1996; a member of the Academic Advisory Panel at the New York Fed from 1990 to 2002; and chairman of the President's Council of Economic Advisers from June 2005 to January 2006.

Ben Bernanke first joined the Board of Governors of the Federal Reserve in 2002 and was appointed as chairman by President George W. Bush. He took office on February 1, 2006, and succeeded Alan Greenspan. The nomination of Ben Bernanke, as an academic, was seen as a break from previous Fed chairmen, who have typically come from Wall Street and financial institutions. For example, Bernanke's predecessor had rejected inflation targeting, whereas Bernanke preferred a stated inflation objection based on his belief that it would bring about economic growth and stability.

During Bernanke's first tenure as chairman of the Fed, he oversaw the 2008 banking crisis, also known as the Great Recession, and took aggressive and experimental steps to restore confidence in the financial system. This included working with President George W. Bush and Secretary of the U.S. Department of the Treasury Henry Paulson to draft the Emergency Economic Stabilization Act, which aimed to protect the U.S. financial system from the widespread losses in the subprime mortgage sector.

Further, he employed various strategies to try and curb the global financial crisis. This included enacting a low-rate policy, having the Fed slash the benchmark interest rate to near zero, and allowing banks to lend money to each other at low cost and offer low-interest rates on loans to consumers and businesses. Further, he proposed a quantitative easing program. This scheme involved the unconventional purchasing of treasury bond secubailrities and mortgage-backed securities to increase the money supply in the economy, increasing the demand for the security, and therefore leading to an increase in prices. This caused interest rates to fall in response to the higher prices, which helped reduce the financial costs for business investments, and thereby improve those businesses' positions. This was intended to bolster those businesses and help them create more jobs to reduce the unemployment rate.

Bernanke, in his role as the chairman of the Fed, also worked to curb the deteriorating economy through bailouts for several troubled financial institutions. The Fed underwrote a decision to let Lehman Brothers fail but bailed out other companies The choice to bail out some banks and not others was based on the risk those companies posed if they went bankrupt. One of the companies bailed out was AIG; Bernanke believed the company's huge liability was isolated in its financial products, and if it lost out on its speculative position, it would not have sufficient funds to cover its losses. Further, the Fed incentivized the purchase of Bearn Stearns and Merrill Lynch by Bank of America and JPMorgan.

Although many suggested that Bernanke and the Fed's moves through the financial crisis helped to keep the economy from entering into a depression and helped the United States recover sooner than it may have otherwise, the decisions of Bernanke and the Fed were not without criticism. Bernanke was for pumping hundreds of billions of dollars into the economy through the bond-purchase program, which was believed to have increased individual and corporate debt and led to inflation. He and the Fed were further criticized that they did little to prevent the crisis from happening. However, despite the criticism, Bernanke was re-appointed for a second term as the chairman of the Fed position in 2010 by President Barack Obama. In 2014, after his second term, Bernanke was succeeded by Janet Yellen.

Following his departure from the Fed, Bernanke became a Distinguished Fellow in Residence at the Brookings Institution, a public policy think tank. In 2013, Bernanke published The Federal Reserve and the Financial Crisis, a compilation of Bernanke's lectures about the history of the Federal Reserve and the financial crisis of 2008. In 2015, he published The Courage to Act: A Memoir of a Crisis and Its Aftermath, which chronicled Bernanke's experiences as the chairman of the Fed and the circumstances around the 2008 collapse, offering reasoning behind the actions the Fed took under his direction. And in 2022, Bernanke published 21st Century Monetary Policy: The Federal Reserve from the Great Inflation to COVID-19.

In 2022, Bernanke won the Nobel Prize for Economics, officially known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, as it was created in 1968 and not included in Alfred Nobel's will from 1895, which established the prizes. Bernanke won the prize alongside Philip Dybvig and Douglas Diamond, because they have "significantly improved our understanding of the role of banks in the economy, particularly during financial crises."

The Nobel Prize committee referenced Bernanke's research that focused on the causes and consequences of the Great Depression of the 1930s. This research was published in a journal article in 1983, titled "Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression." In the article, Bernanke argued the primary cause of the Great Depression was the general inability of banks to fund productive investments through loans to businesses or consumers, which caused reductions in deposits by customers of the banks and the need for banks to retain the money that could be demanded in future bank runs. This, according to Bernanke, exacerbated the recession and transformed that recession into a depression.

Bernanke also maintained that bank failure results in the loss of information on the general creditworthiness of potential borrowers, including a loss of the investment history of individuals and institutions. This information takes years to develop, and it is difficult if not impossible to recover.

Bernanke's investigations and research used complementary research by Douglas Diamond and Philip Dybvig, which explained how banks generate liquidity and make economic activity possible. Diamond's research explained how banks perform crucial functions through assessing the creditworthiness of potential borrowers by monitoring debt repayments.