- Bernanke spoke openly about the Lehman Brothers weekend and the decisions the US Government made and the impact it had on the US economy and around the world. He believes the way that period was recorded was not accurate. It was said that the failure of Lehman was policy choice, but the truth is the opposite of that.
- In the middle of the most intense financial crisis in US history, a meeting was set up at Federal Reserve Bank to discuss what to do. Choices made were different to AIG - AIG had the collateral and just needed cash to survive.
- The Troubled Asset Relief Program (TARP) turned out to be the most successful, the most profitable and yet the most unpopular system.
- Doing his historical research on economic depressions, Bernanke knew that the FED would be the lender of last resort in order to reduce the pressure of the run.
- Bernanke and the FED’s efforts to attack the crisis were international.
- US markets were disrupted by the tremendous demand for US dollars - in particular from 14 countries around the world, including Australia. So the US decided to swap $US for foreign currencies to facilitate lending.
- The Federal Reserve stood ready to be the lender of last resort.
- Stress Tests were organised for corporations to see what would happen to the balance sheets if there was a new and deeper crisis. This was effective because companies showed they could remain solvent and lend if it eventuated. The valuable aspect of the stress test was that it disclosed all their financial results to the public so investors could see who was strong and who wasn’t and it certainly helped with economic recovery and confidence in the markets.
- Bernanke agrees that we need risk taking in the future to build a healthy economy – we just need to monitor it closely.
- The questions we should ask are: “Is the system itself at risk?” “Are there pricings that threaten the stability of the financial system?” We need to try to strengthen the overall system or try to respond to specific problems. We need to be more nimble in our response. We need to continue to experiment and see how new policies work.
- What’s going to happen to productivity growth? It’s a challenge due to the population getting older and people living longer, with fewer workers, and slower growth. And it’s even more extreme in Japan where the labour force is shrinking.
- The financial system is much more stable than it was. Everything is better.
- US unemployment rate today sits around 5.5% and it’s falling – but during the GFC it was around 9%.
- Bernanke jokes that ‘prediction is very difficult, especially about the future.’ According to him, there’s not much to indicate, at this point, that there are any major risks to the stability of the system. Yes growth has been slow but it’s still growing and recovering. It’s not going great guns but we are in the middle of a growth period. There’s still plenty of scope to keep growing in the US and we continue to see positive growth, just maybe not exciting growth.
- If there was to be a crisis, where it would come from? Bernanke believes it would be geo-political risks. Financially he says we are stronger and there are more tools to address possible risks. So it’s difficult to know where shocks could come from. But a de-stablising situation is less than it could otherwise be.
- Looking back at the GFC in 2008/9, economies all went up and went down together. Since then, countries have moved in their own independent way, doing different things. This may need to change.
- Today, Ben Bernanke opens the Wall Street Journal and the Financial Times and says to himself, “Wow, that’s a serious problem I hope somebody does something about that.” Let’s hope we all look back at history to see what worked and what didn’t to help make the right decisions for the future.
So what does Bernanke hope for the future? Economically he says, “A lot of boredom. Boring is good, boring isexcellent, because that means everything is working well.”
Randstad was proud to be a major sponsor of the World Business Forum in Sydney 27-28 May 2015.
Dr Ben Bernanke
As a two-term Chairman of the Federal Reserve System from 2006 to 2014, Bernanke has faced some of the most critical economic and financial challenges since the Great Depression. His leadership helped avert a global financial meltdown during late 2000’s, before jump-starting a U.S. economic recovery.
Serving under two Presidents, Bernanke was responsible for the monetary policy of the world’s biggest economy, developing policies that would prevent the possibility of economic collapse and then creating the conditions for recovery and growth.