June 8, 2009 1:30 PM
- Text
Ben Bernanke's Greatest Challenge
(CBS)
This story was first published on March 15, 2009. It was updated on June 4, 2009.
Aside from the president he's the most powerful man working to save the economy, but Ben Bernanke had never done an interview until he sad down with 60 Minutes correspondent Scott Pelley earlier this year.
Bernanke is the chairman of the Board of Governors of the Federal Reserve System, better known as the Fed. The words of any Fed chairman cause fortunes to rise and fall and so, by tradition, chairmen of the Fed do not do interviews - that is until now.
The Federal Reserve controls the economy by setting interest rates. But after the crash of 2008, Bernanke invoked emergency powers, and with unprecedented aggressiveness has thrown a trillion dollars at the crisis.
Ben Bernanke may be the most important Fed chairman in history. The question is, can he help lead America out of this deep recession and when?
"Mr. Chairman, I'm gonna start with a question that everyone wants me to ask: when does this end?" Pelley asked Bernanke.
"It depends a lot on the financial system," he replied. "The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis. We've seen some progress in the financial markets, absolutely. But until we get that stabilized and working normally, we're not gonna see recovery. But we do have a plan. We're working on it. And I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time."
Asked if he thinks the recession is going to end this year, Bernanke said, "In the sense that this decline will begin to moderate and we'll begin to see leveling off. We won't be back to full employment. But we will see, I hope, the end of these declines that have been so strong in a last couple of quarters."
"But you wouldn't say at this point that we're out of the woods?" Pelley asked.
"No," Bernanke replied. "I think the key issue is the banking system and the financial system."
"I wonder, do you expect double digit unemployment?" Pelley asked.
"Well, it's hard to forecast exactly where we're going. Unemployment is rising. Job losses are still very severe. And no doubt, the unemployment rate's gonna go higher than it is. But I think, again, that if we do succeed in stabilizing the financial system, that we'll begin to see a slower pace of decline, and eventually, a stabilization that will set the basis for a recovery," Bernanke said.
"You seem to be saying that we're not heading into a new American Depression?" Pelley asked.
"I think we've averted that risk. I think we've gotten past that and now the problem is to get the thing working properly again," the chairman said.
Bernanke, age 55, has been chairman of the Federal Reserve Board since 2006.
For this interview, he opened up the Fed headquarters, rarely seen by the public. It's a monumental building along the National Mall. Construction started in 1935 in the depths of the Great Depression.
"You know Mr. Chairman I think the Federal Reserve, for most people, is a mystery," Pelley remarked.
"Well, it's an institution that people don't hear so much about but it's a very important one. It manages monetary policy for the country. It's one of the main tools we have for stabilizing our economy and keeping prices stable," Bernanke said.
Asked when it was founded, Bernanke told Pelley, "The Fed was created by Congress in 1913. And its original purpose was to deal with financial panics, which is what we're doing right now."
Bernanke's crisis started in 2007 with the mortgage meltdown; lenders began to fail. Bernanke cut interest rates repeatedly. In 2008, the Fed stopped the collapse of Bear Stearns by arranging a sale to another firm.
But then came the end of Wall Street as we knew it. Mortgage giants Fannie Mae and Freddie Mac were seized by the government. On Sept. 14, Merrill Lynch was sold in distress. The next day, the 158-year-old investment bank Lehman Brothers failed
"You didn't rescue Lehman Brothers. It set off a worldwide panic when it went bankrupt. And I wonder, looking back, whether you think that was a mistake," Pelley asked.
"There were many people who said, 'Let 'em fail.' You know, 'It's not a problem. The markets will take care of it.' And I think I knew better than that. And Lehman proved that you cannot let a large internationally active firm fail in the middle of a financial crisis. Now was it a mistake? It wasn't a mistake for the following reason: we didn't have the option, we didn't have the tools. All the Federal Reserve can do is make loans against collateral," Bernanke replied.
Aside from the president he's the most powerful man working to save the economy, but Ben Bernanke had never done an interview until he sad down with 60 Minutes correspondent Scott Pelley earlier this year.
Bernanke is the chairman of the Board of Governors of the Federal Reserve System, better known as the Fed. The words of any Fed chairman cause fortunes to rise and fall and so, by tradition, chairmen of the Fed do not do interviews - that is until now.
The Federal Reserve controls the economy by setting interest rates. But after the crash of 2008, Bernanke invoked emergency powers, and with unprecedented aggressiveness has thrown a trillion dollars at the crisis.
Ben Bernanke may be the most important Fed chairman in history. The question is, can he help lead America out of this deep recession and when?
"Mr. Chairman, I'm gonna start with a question that everyone wants me to ask: when does this end?" Pelley asked Bernanke.
"It depends a lot on the financial system," he replied. "The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis. We've seen some progress in the financial markets, absolutely. But until we get that stabilized and working normally, we're not gonna see recovery. But we do have a plan. We're working on it. And I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time."
Asked if he thinks the recession is going to end this year, Bernanke said, "In the sense that this decline will begin to moderate and we'll begin to see leveling off. We won't be back to full employment. But we will see, I hope, the end of these declines that have been so strong in a last couple of quarters."
"But you wouldn't say at this point that we're out of the woods?" Pelley asked.
"No," Bernanke replied. "I think the key issue is the banking system and the financial system."
"I wonder, do you expect double digit unemployment?" Pelley asked.
"Well, it's hard to forecast exactly where we're going. Unemployment is rising. Job losses are still very severe. And no doubt, the unemployment rate's gonna go higher than it is. But I think, again, that if we do succeed in stabilizing the financial system, that we'll begin to see a slower pace of decline, and eventually, a stabilization that will set the basis for a recovery," Bernanke said.
"You seem to be saying that we're not heading into a new American Depression?" Pelley asked.
"I think we've averted that risk. I think we've gotten past that and now the problem is to get the thing working properly again," the chairman said.
Bernanke, age 55, has been chairman of the Federal Reserve Board since 2006.
For this interview, he opened up the Fed headquarters, rarely seen by the public. It's a monumental building along the National Mall. Construction started in 1935 in the depths of the Great Depression.
"You know Mr. Chairman I think the Federal Reserve, for most people, is a mystery," Pelley remarked.
"Well, it's an institution that people don't hear so much about but it's a very important one. It manages monetary policy for the country. It's one of the main tools we have for stabilizing our economy and keeping prices stable," Bernanke said.
Asked when it was founded, Bernanke told Pelley, "The Fed was created by Congress in 1913. And its original purpose was to deal with financial panics, which is what we're doing right now."
Bernanke's crisis started in 2007 with the mortgage meltdown; lenders began to fail. Bernanke cut interest rates repeatedly. In 2008, the Fed stopped the collapse of Bear Stearns by arranging a sale to another firm.
But then came the end of Wall Street as we knew it. Mortgage giants Fannie Mae and Freddie Mac were seized by the government. On Sept. 14, Merrill Lynch was sold in distress. The next day, the 158-year-old investment bank Lehman Brothers failed
"You didn't rescue Lehman Brothers. It set off a worldwide panic when it went bankrupt. And I wonder, looking back, whether you think that was a mistake," Pelley asked.
"There were many people who said, 'Let 'em fail.' You know, 'It's not a problem. The markets will take care of it.' And I think I knew better than that. And Lehman proved that you cannot let a large internationally active firm fail in the middle of a financial crisis. Now was it a mistake? It wasn't a mistake for the following reason: we didn't have the option, we didn't have the tools. All the Federal Reserve can do is make loans against collateral," Bernanke replied.
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