​Q&A: Ben Bernanke

Whether the Federal Reserve raises interest rates is a question former Fed Chairman Ben Bernanke is glad HE no longer has to answer. But other questions, Bernanke and his wife, Anna, are happy to discuss. Norah O'Donnell of "CBS This Morning" dropped in on them at their home in Washington:

O'Donnell asked Anna Bernanke, "What was your reaction when your husband was offered the Fed chairmanship?"

"I burst into tears -- and they were not tears of joy!" she laughed.

If only she had known what lay ahead.

Just one year after Ben Bernanke became Chairman of the Federal Reserve Board, the economic alarm bells started going off. Now, a year after leaving the Fed behind, Bernanke is putting the crisis into perspective -- HIS perspective.

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Ben Bernanke with CBS News' Norah O'Donnell.
CBS News

He described the financial crisis as "the "worst in human history."

Worse than the Depression? "The financial crisis itself, the collapse of asset prices, the near-collapse of so many large financial institutions, in my view, was a worse crisis than even what we saw in 1929, 1930."

The summer of 2008 saw panic across the globe.

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W.W. Norton

"If you look at the major financial firms, most of them either failed or came close to failing or needed some kind of help," he said.

"And it would have taken down the entire economy," said O'Donnell.

"It did!"

The problem was that financial firms were increasingly putting their money into complex investments that many people hardly understood -- many based on risky, sub-prime mortgages. When the housing bubble burst and those mortgages started going under, the firms started to go under, too.

Given the Fed's job to keep the economy stable, it all landed squarely on Bernanke's desk.

"If it was the worst in human history," asked O'Donnell, "why didn't more experts like you see it coming?"

"Well, we didn't. We understood part of it. We saw that there were problems in the housing sector. We saw there were developing problems in sub-prime mortgages. What we didn't see, what I think almost anybody didn't see, was the vulnerability of the financial system to those factors."

Bernanke was never the most obvious person to lead the Fed. He grew up in small-town Dillon, South Carolina, where his father owned a pharmacy started by HIS father. Ben and his younger brother, Seth, who is now a lawyer, often visited their maternal grandparents in nearby Charlotte, "where Grandma cooked all her wonderful specialties," Ben recalled

Young Ben's specialty was numbers. He achieved almost-perfect SAT scores -- 1590 out of 1600, as his brother well-remembers:

"Well, I always feel fortunate that we haven't had areas where we were really competitive -- that would have been bad news for me," Seth said.

Bernanke spent a lot of time on baseball. Not playing it, but tracking the stats. His notebooks, Seth said, "were jam-packed with all the players' names and all their different statistics. I remember looking at those things and saying, 'I just don't see the attraction.'"

When he was 11, Bernanke won the South Carolina State Spelling Bee., which earned him a trip to Washington, D.C.

"I made it to the finals," he recalled. "And the word they asked me was Edelweiss, which is a Swiss flower, which was the name of a song in the movie 'Sound of Music.' Unfortunately, Dillon, my hometown, did not have a theater. I had not seen the movie, so I had never heard of an Edelweiss, and I misspelled the flower. And so I didn't win the National Spelling Bee."

And how do you spell it? "E-D-E-L-W-E-I-S-S," he laughed. " I'll never forget that word!"

Back in Charlotte visiting his grandparents, there was something else he never forgot.

"I used to sit on that porch there with Grandma. She would tell me stories about the Depression. She lived in a town where they had a shoe factory that had shut down. And because there was no jobs, the children of the shoe manufacturers didn't have shoes. And I thought that didn't make any sense at all. And I remember getting interested in, you know, how an economy can get messed up."

As an economics professor at Princeton, Bernanke studied the Depression, concluding that, back then, the Fed didn't do enough. And so with the economy getting "messed up" under Bernanke's watch, he was acutely aware of the potential devastation. He says the problem was that to save Main Street, he had to bail out Wall Street.