Ben Bernanke, Angel and Devil

Among the “100 Greatest World Thinkers” the American magazine Foreign Policy listed on 1 December, who is the primus inter pares? For once, it is not Barack Obama – he is only second. The greatest current intellectual is named Ben Bernanke and he serves as president of the Federal Reserve (the Fed, the equivalent of a central bank in the United States). Few foreigners appear on the list: eleven of the top twenty are American, and this ratio continues up to the one hundredth. The French’s great thinker is named BHL (31st), and their second greatest is Dominique Strauss-Kahn (33rd). Also appearing are Esther Duflo (41st), development economist and researcher at MIT, and Jacques Attali (86th).

Since this kind of typology reveals the tastes and competencies of the juries as much as the preexisting notoriety of the happy chosen ones, one question remains: why Mr. Bernanke? Certainly, since childhood, he has been a prodigy, an exceptionally gifted individual who received the highest grade on the exam upon leaving high school. His linear path was headed to the summits: studies at Harvard, then MIT, a noteworthy doctorate, and an unchallenged specialist on the crisis of 1929.

This “zen master,” the magazine explains, has “transformed a superb academic career into a handbook for action, reinvented the role of the central bank, and avoided the collapse of the American economy. To have accomplished this in the space of a few months is certainly one of the greatest intellectual exploits of recent years.” At nearly 56 years old, here is the former Princeton professor, who cares about his modest image and for a beard that is always impeccably trimmed, the devoted savior of American and world finance.

Two days later, the same man that was appointed by George Bush was selected by Barack Obama for a second term and presented himself for the required confirmation examination before the Senate banking committee. In front of the committee, there was a complete change of tone. Republican Richard Shelby, vice president of the committee, judged that, under the aegis of Mr. Bernanke, “the Fed, as regulator, has done a calamitous job.” Calling him “incompetent,” Republican Jim Bunning, showing all the esteem in which he holds the intelligentsia in general and the academy in particular, shot at him: “Go back to Princeton” – you would have thought you heard “go back to your country.”

The left was not to be outdone. Starting the following day, on his blog, Nobel laureate Paul Krugman was in despair: Mr. Bernanke acted “badly, very badly” by refusing to support a new stimulus plan for jobs. When Democrat Christopher Dodd, who was presiding over the Senate debates, made his praise (to justify the reappointment), he could not help but declare that, given that the Fed failed in its role as regulator, the time had come to take back the bank’s supervisory tasks and other prerogatives.

No doubt, Ben Bernanke does not merit such indignity nor the position of grand helmsman of global “thinking.” One can hardly consider that a man who publicly recognizes his faults would demonstrate a rare audacity in front of the Senate. Although he did boldly admit before the committee that he had “not anticipated a crisis of this amplitude” and that his institution “was far from doing a perfect job.” To calm the fury of senators incensed by the bailout of major financial institutions, he admitted that allowing the banks to over-capitalize “is an error that we will not commit again.”

It was a difficult moment, but the man has a flexible backbone and political skills that are not common. When the crisis became flagrant, in September 2008, he intelligently stepped aside to allow the Republican Secretary of the Treasury, Henry Paulson, to endure the essential blows. After the election of Mr. Obama, he opportunely remembered that his first intellectual master, Milton Friedman (from whom he has distanced himself), had himself advocated for printing money in certain circumstances (in theface of a deflationary risk) to support investment and consumption. He thus actively participated in concocting the plan for major public spending as desired by the Obama administration, which the opposition unanimously denounced as a “folly” – the word “crime” was uttered.

The truth is that Ben Bernanke no more foresaw the crisis than the vast majority of his peers, with rare exceptions, or the elected officials who today condemn him. Another Republican, Jim DeMint, cruelly cited in the committee a series of excerpts from his speeches: before and even after the explosion of the real estate bubble, the boss of the Fed demonstrated to analysts confidence that was widespread at the time. Who would not be surprised? Was he not convinced – like them, like his predecessor Alan Greenspan, like the vast majority of American “thinkers” – of the rational virtue of markets?

It was Ben Bernanke who explained, in a famous speech given on 14 April, 2005, that the chronic American deficit was not due to the general malfunctioning of an economy founded on a constantly increasing structural debt, but on what he called “the combination of various forces over the last decade, which have created a significant growth in the global supply of savings – an excessive general savings.” That is to say, if America is indebted, it is the fault of others, who are too cautious.

At the time, he was still the head of the White House economic council under George Bush. To err is human. Barring an extraordinary surprise, at the end of his term on January 10, 2010, Mr. Bernanke will be reconfirmed.