Federal Reserve Chairman Ben Bernanke, who helped steer the nation through the worst economic crisis since the Great Depression, was named TIME Person of the Year 2009 on Tuesday, eclipsing finalists who included President Barack Obama and House Speaker Nancy Pelosi.
“He didn’t just reshape U.S. monetary policy; he led an effort to save the world economy,” Time’s Michael Grunwald writes in the cover story, which will be on newsstands Friday.
Asked by Time in a Dec. 8 interview if bankers make too much money, Bernanke replied: “I think that bankers ought to recognize that the government and the taxpayer saved the financial system from utter collapse last year. And in recognizing that, I would think that bankers ought to look in the mirror and decide that perhaps there should be some more restraint in how much they pay themselves, given what the government and the taxpayer did to protect the system.”
Bernanke certainly has transformed monetary policy. He has taken it to new levels, however, whether that's a good thing or something dangerous is still a matter of debate. Did Bernanke keep the U.S. economy from going into a tail spin? He probably at least contributed. How did he do this though? He lowered the Fed Funds Rate to zero and created more than two trillion dollars worth of new money? Is that bold and courageous or reckless? That's a question that remains.
There was a time that Alan Greenspan was seen as an oracle. He was similarly seen as saving the U.S. economy in 2001-2002. He's now viewed by many as the villain that created the current crisis. The same may wind up being seen of Bernanke.
It's important to note that what Bernanke did was neither bold nor innovative. Anyone can lower rates until they can't go any lower. Anyone can create trillions of dollars in new money. That's not bold or innovative. What would be bold and innovative would be to keep the economy from collapse without doing these things. This sort of monetary policy has all sorts of unintended consequences that haven't materialized yet. So, today's man of the year can be tomorrow's villain very quickly.
Speaking of Bernanke,the Fed minutes just came out. The rates remain unchanged. The language says that the economy remains weak. The Fed Funds Rate is now at zero for just over a year. The Fed just called inflation "subdued".