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Bernanke Vs Greenspan

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A Compare and Contrast of Ben Bernanke and Alan Greenspan Ben Bernanke and Alan Greenspan had very similar views on how to run the Federal Reserve (Fed.) and the United States economy. Alan Greenspan was chairman of the Fed. from 1987 to 2006, serving five terms. After Greenspan retired his position of chairman he was succeeded by Ben Bernanke, who served a four year term from 2006 to 2014. At the time of Bernanke’s nomination, he said his “first priority would be to maintain continuity with the policies and policy strategies during the Greenspan years.” Bernanke wanted to keep the Fed. on “Greenspan standards” (Robb, 2013). Bernanke made it clear that whatever Greenspan had done during his five terms as chairman often referred to as “The …show more content…

Greenspan’s way of talking and presenting information is hard to understand from a layman 's perspective, he talks with precision and is often unclear. Although he was hard to understand, people could see the improvement in the economy and the stability his strategy supplied. While his legacy and free market strategies were based off deregulation of financial organizations and banks to promote economic growth, cutting back on governmental regulations between companies and people. He believed that the government doesn’t control prices, supply, or demand. He focused more on inflation, keeping prices down and the value of money up instead of lowering the unemployment rate (Treanor, 2013). His strategy to keep inflation low by keeping interest low led to the 2008 mortgage crisis only two months after his retirement. Greenspan 's strategy caused the Fed. to be caught off guard by the scale of the housing bust. Ultimately leading to the worst financial crises in the U.S. since The Great Depression …show more content…

Ben Bernanke’s and Alan Greenspan’s theories and ways to run the Federal Reserve were very similar at the start of Bernanke’s term, but when problems arose in the economy Bernanke had to be innovative and act quickly to prevent the recession from becoming a depression. Greenspan’s original theory of a deregulated and hands off approach to the economy worked well in stabilizing the economy and reducing inflation. His approach in reducing interest rates to keep inflation low worked well but his effort to keep the same rates throughout his 18 year term had caused a ripple effect in the economy after it became stable and stronger. His deregulation of certain financial derivatives had left shareholders vulnerable to lending institutions, and banks on Wall Street with billions of dollars in

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- What are the two primary mandates of the Federal Reserve? “…so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. ”[1] The two primary mandates, sometimes referred to as the Dual Mandate, would be maximum employment and stable prices. The goal of long-term interest rates is somewhat dealt with when an attempt is made towards stable prices.

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Before this act was passed, banking was not regulated which allowed banks to set interest rates to whatever they wanted and control the money supply. This led to many money panics that led to recessions and depressions. The Federal Reserve Act called for there to be regional reserve banks that would be overseen by a Federal Reserve Board that would be appointed by the government (74). The passing of Federal Reserve Act is considered a progressive action because it regulated the banking industry and prevented trusts between the individual banks

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He promised that the government would intervene in the economy to provide relief for the great depression, he proposed a ‘new deal’ that would give millions of Americans jobs and create a more stable US economy. “Roosevelt faced the greatest crisis in America since the Civil War.” (Franklin D. Roosevelt Biography). In the beginning of his presidency, he began to make good on his promises, he created many agencies and associations to help get the economy under control and to help lower the unemployment rate. As the economy was stabilizing and the unemployment rates and GDP were beginning to rise back up to normal levels, he fell under criticism for putting too much power in the government’s hands for controlling the economy.

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To conduct the nation’s monetary policy is to “promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy;” (Board). The Federal Reserve promotes the stability of the financial system. Promoting the stability of the financial system is to seek to “minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad;” (Board). The Federal Reserve promotes the safety and soundness of individual financial institutions, “and monitors their impact on the financial system as a whole;” (Board). The Federal Reserve “fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments;” and “promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of

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Along the same line of thinking for protecting the freedoms of the people, the government creates and enforces the law of the market but should not directly participate in the game (Friedman, 1975). Intervention as a discrepancy from Friedman’s theory is understood as the Federal Reserve keeping interest rates low prior to the crisis. This will be discussed later in the

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