In the aftermath of the 2008 financial
meltdown, Ben Bernanke, America's leading scholar of the Great Depression,
has been credited with saving the nation's economy. As a reward for
his sterling work, on August 25, 2009, President Obama appointed Ben
Bernanke to a second term as the Chair of the Federal Reserve.
Three cheers for Ben!
Apparently, if Ben Bernanke hadn't
saved our bacon, quite a few Americans would currently be living in
Hoovervilles or roaming the countryside in Joad-jalopies. Certainly,
no one wants that to happen. So, how did Bernanke pull off his epic
economic miracle, i.e., snatching the economic system from the jaws
of disaster and, in the space of only a few short months, returning
it to a state of sanity and prosperity?
While Ben's Miracle may have spared
the country years of misery -- BTW, it took FDR three terms to
accomplish what Bernanke has wrought in a mere nine months -- it has
also etched a highly innovative chapter in the history of capitalism.
Indeed, for true believers in the history of capitalism, the chapter
on Ben's Miracle is likely to produce a shock of gray hairs. According
to its authorized history, capitalism is an economic system that is
based upon risk and reward. Risky investments offer the advantage of
large returns, however, they also escalate the chances of financial
ruin. Thus, capitalism is often touted as the most efficient of all
economic systems because of the way that it rewards wisdom and punishes
fools. At least, that's how it's supposed to work.
For the purposes of accomplishing his
Miracle, Ben Bernanke suspended some of the most fundamental rules of
capitalism. In November 2008, when the full scope of the financial crisis
came to light, instead of permitting corporate jackals to reap the financial
ruin that they so richly deserved, Ben loosed a near Biblical deluge
of financial absolution. All sins were forgiven, no lunkheaded investment
was too egregious to merit a bailout. TARP was only the beginning. To
enhance liquidity, the Fed bought up trillions in toxic assets.
At this point, one might ask, "So,
where did Ben get all the money to resuscitate those Wall Street wastrels?"
Well, apparently, in Ben Bernanke's economic universe, money grows on
trees. No wonder Obama reappointed him. Who on earth would fire a financial
wizard of that caliber? Anyone who can conjure trillions of dollars
during the nation's darkest hour has certainly earned his spot on
the roster. Still, to be perfectly honest, that's what ticks me off
about Ben and his Miracle.
That is, during times of economic sanity,
the high priests of capitalism often preach that money is a scarce and,
therefore, precious resource. These homilies usually include admonitions
about how to earn an honest living: work hard, play by the rules, invest
wisely -- or else, plummet into the abyss.
Actions speak louder than words. Ben
Bernanke may talk like a true-believer, but his economic Miracle willfully
contradicts the most sacred tenets of capitalism. Rather than punishing
irresponsible investors, Ben's Miracle was predicated upon a strategy
that rewarded financial malfeasance; even to the point of handing out
bonuses to incompetent executives. Of course, Bernanke embraced this
morally hazardous solution because financial high-rollers had cunningly
diffused the jeopardy of their incautious investments--via the magic
of credit default swaps--throughout the entire financial system. Given
the dire threat of systemic risk, Bernanke had little choice but to
implement a policy of universal clemency.
Leaders often have to make tough decisions.
Given the available options, either bailing out Wall Street's reprobates
or watching the entire economic system collapse, I believe Ben made
the right choice. Indeed, so long as I am able to keep my job, my home,
and continue feeding my family, my support for Big Ben will remain steadfast.
In an imperfect world, Ben Bernanke has managed the 2008 meltdown about
as well as anyone could hope.
That said, I do find Ben's solution
to the 2008 financial crisis somewhat alarming. Consider, if you will,
the economic precedent that Bernanke has set: moral hazard is as dead
as a dodo. The sharks on Wall Street are not fools. Ben's universal
bailout illustrated that, as long as there is sufficient collusion among
investors, they need no longer fear the downside of taking contemptible
financial risks. Success is assured if only the geniuses on Wall Street
can find some way to threaten the entire economic system. How's that
for irony? Ben Bernanke has proclaimed to the world's financial pirates
that, by risking everything, they will--at least on his watch--risk
nothing. Maybe it's just me, but that's not what I consider an enduring
or palatable solution to the current economic crisis.