Ben Bernanke: The 2008 Financial Crisis

Introduction In 2008, the US entered an economic downturn known as the Great Recession that resulted largely from a crisis with subprime mortgage lending. Ben Bernanke, serving two terms as Chair of the United States Federal Reserve, steered the Federal Reserve to put very particular monetary policy and fiscal policy measures in place to stabilize the economy. Principally, the Federal Reserve Bank bailed out distressed financial firms and institutions; and boosted the US economy through a process of “quantitative easing.” A combination of Ben Bernanke’s experience and economic philosophy impacted the US economy, for the most part, favorably, but not without criticism.
Ben Bernanke’s Background & Experience Ben Bernanke began his position

What could be done to positively influence the economy and encouraged consumer confidence? They provided monetary policies in the form of stimulus together with fiscal policy. Additionally, they offered transparent policies and goals to the US public by the Federal Reserve (“The Legacy,” n.d.). First, they decided to bail out some of the most distressed financial institutions and firms, who had invested in the real estate market, such as American International Group (AIG), and Bear Stearns and keep them out of ruin. “The rationale for the bailouts was that preventing key large companies and banks from failing would lessen the negative effects of the crisis” (Lopus, 2013, p. 127). And even with this measure, the “crisis spread from the United States around the world” (Lopus, 2013, p. 127). Second, US Federal Reserve boosted the US economy through two series of “quantitative easing” (QE). This involved the Federal Reserve making “a large-scale purchase of assets to increase reserves” in the banks (Lopus, 2013, p. 127). In this case, the Federal Reserve bought several mortgage-backed securities and Treasury securities. The long-term Treasury securities were purchased “to keep longer-term interest rates low” and expand the monetary base (Lopus, 2013, pp. 127-128). In the first series of QE, the Federal Reserve “purchased over $1 trillion worth of mortgage-backed

economy’s recovery. Of course, there will always be criticisms regarding what took place, such as we still do not have a balanced budget, but I have to be happy that we also do not have the abysmal economic indicators we had in 2008. We did see an increase in our national debt. . It is currently at 17,941,406,575,143.38 (US Department of the Treasury, 2014), but I see this as a necessary evil for having to stimulate the economy and save some of those troubled institutions. And as far as the Feds focusing too much on financial institutions and banks and bailing out financial institutions rather than letting private market economy prevail, or “directing funds to the best-managed, most creditworthy borrowers” (Miller, 2012, p. 330), I think the failure and ruin of some of those institutions would have shaken up the US public confidence far worse and perhaps contributed to even more of a crisis. The U.S. Federal Reserve Bank assisted these failing institutions and infused the economy with money through the buying of securities, so we would not have to witness a second and perhaps, worse crisis. I see the measures as creative and prudent even if it made the Feds more prominent in the role regulating