Courage to Act

 

Title – Courage to Act

Author – Ben Bernanke – All Rights Reserved.

Year – 2015 – Distributed by Amazon

Publisher – W. W Norton and Company Press

Review by

Sampson Onwuka

The best that can said of Ben Bernanke’s – Courage to Act – is that it provides the reason for FED Reserve intervention during  the U.S Economic crisis in 2008. The crux of argument is that the crisis was not comparable to the Great Depression, that unlike the great depression which was due to the failure of the country to act, the Great Recession of 2008 was not the case. Economic Intelligence can fail. Courage to Act is the anecdote for the practical vista of money supply exercised in theory by leading economics. Whether or not Americans are convinced that the desperate actions for instance 13(13) last invoked in 1936 - taken by Ben Bernanke (U.S Fed Chairman 2006 – 2014) and his group at the Federal Reserve and the U.S Treasuries was meeting standard for the debt-driven economic crisis leading to 2008, is secondary, secondary and partial to the deserving resolutions by decisions taken by members of U.S Government at this point.

The coin toss is between the willingness to act and appropriateness of the actions, for if the ‘courage to act’ is itself the chief item in decision marking complex, it will defeat the essence of risk evaluation. Courage to Act is Bernanke’s defense of his actions during 2008 crisis, and the actions of U.S Federal Open Market Committee (FOMC), which despite their liberty in handling crisis were grappling with the turn of events in the markets in 2008. Several schools of thought; MIT economic, Keynesians, New classical economics, economic school for minimum Government Intervention for Chicago, etc., take their turn in trying to master the desperate new dimension of the Banks in the United States and the impact of Federal Funds rate. 

In 1782 – 1791 U.S had constitutionally chartered several American Banks and the brunt of the Bank’s activity rested one time treasury - Alexander Hamilton. In the later decades enjoined by the compeers, U.S created the First Bank of the United States (1791 – 1811), followed by the Greenbacks in 1862 and imprimatur panic of 1837, 1857, 1873, 1893, and 1907 where William Bagehot arguments failed to stem the tide of a great unraveling. Less than a decade later (1914) U.S created the Federal Reserve that faced in early 30’s the imprecation of a Great Recovery. Bernanke observed that nearly all periods of Great banking shake-up in the United States was during economic depression and recession. And these changes in Banking are still visible in the United States. We are led to perceive that certain changes were concomitant with depression and recession as if these changes depended on disaster, as if the country could have performed without these disasters. Whether or not this is the case, the 2008 crisis was not going to be different.  

It was perhaps wonderful to witness how feverish the financial world collapsed into the atrium of Mariner Eccles Building with many actors of money markets and financial cabals; Mervin King (England), Magacki Shirakawa (Japan), Jean Claude Trichet (ECB), Mario Draghi (Italy) set to take actions and that their actions were to have a lasting impact on banking and finance and they were sure of it. The author is reminded of such circumstances by allusions to his grandparents detached from Austro-Hungary and Lithunia uncertain about their new found homes in the United States. 

The new U.S president Barack Obama needed an answer, perhaps a solution to the economic arising from 2008, and the idea was not hard to find. The banks were to be held responsible for certain behaviors and this include some big dependable bank. There was something lacking with many of the banks including Bear Stearns and Lehman Brother who led much of the market in debt recovery and something was wrong with the financial structure of AIG which on the surface did not show any signs of collapse. AIG needed money and is the apple of every body’s eyes, so also Lehman and many other investment banks. Some of the investment brokerage would be let go and to a large extent, the toss was between AIG and Lehman rested on the seismic impact in the Global Macro. It mattered that some actions must be taken, that such actions may or may not seem popular and accepted by all, but a change was necessary and hence the changes at the Banks – some of whom were doomed to fail - were a second matter in 2008. Bernanke had to introduce a way of knowing the real strength of these banks and this led to the introduction of financial stress test for U.S banks.

Short View

There are several things which a book of this nature lack, an author can speak of his or her own influences and governing psychology. For Ben Bernanke this was not clearly the case and whether or not his reach with ‘Helicopter Ben’ prompt an indirect comparative and influence from Benjamin Strong, his influence was not clear in the whole evolution of the courage to Act, but the script inundated his activity in office and it was easy from beginning to see that Bernanke was an inflation hawk. Some may say Stanley Fischer that go back to the 1983 NBER, but from the cursory glance at the later 200 of the last and receding 600 pagination, there is a presence of Jamie Dimon and Lloyd Blankfein.

We look at the term failure to Act is a beseeching entropy for understanding the problems of Banks on a national level, that the it seems after reading a portion of the Bernanke’s Courage to ACT, that there was something lacking in the attitude of the Government and at the Feds. What was it? Perhaps the problem was not the courage to act but the excuse to act – or the audacity to act from the perceived notion that banking industries needed reform. We can read from Bernanke’s ‘Courage to Act’ that a ‘failure to act’ is a product of ‘leisure class’ re-adaptation of Adam Smith economics lazes- faire or do nothing classic approach during periods of great upside. It was in terms of national crisis, the best approach to perceived and periodic recession. 

Perhaps this is not always the case, this is not the case when there are questions of credit options, credit squeeze, details of credit auctions, hosting the changes houses which we confront every day that predate changes at the world of Banks driven by public media frenzy fawning the psychology of money. We cannot fail to presume from the ‘Courage to Act’ a question of exact period of time when Federal Reserve had to intervene and for how long. 

There are so many things the author and the Courage to Act didn’t talk about; the problem of market collisions or what happens when markets collide, the poverty of Taylor rule application – at least in the last receding 20 years at the Federal Reserve and under the chairmanship of Bernanke, how U.S Banks got exposed easily oversea, the issue of re-investment Act and U.S financial literacy. Bernanke did not discuss conversion rate, the rate of a city return rate to federal or national rate, the crass of internal economies of scale and interstates lending, the possible solution to housing given its causation for the crisis, the issue of shadow banking that rock much of our U.S investment banks, the future of the Federal Reserve, shift and duration associated with bond markets and precious metals – in contest of recent adverse with crude oil at least on the plainest possible example, the U.S financial oligarchy in context of unemployment, etc., which he so well handled.