They Know It's Wrong
by David Atkins
Bernanke was and is a fine economist. More than that, before joining the Fed, he wrote extensively, in academic studies of both the Great Depression and modern Japan, about the exact problems he would confront at the end of 2008. He argued forcefully for an aggressive response, castigating the Bank of Japan, the Fed’s counterpart, for its passivity. Presumably, the Fed under his leadership would be different.
Instead, while the Fed went to great lengths to rescue the financial system, it has done far less to rescue workers. The U.S. economy remains deeply depressed, with long-term unemployment in particular still disastrously high, a point Bernanke himself has recently emphasized. Yet the Fed isn’t taking strong action to rectify the situation.
The Bernanke Conundrum — the divergence between what Professor Bernanke advocated and what Chairman Bernanke has actually done — can be reconciled in a few possible ways. Maybe Professor Bernanke was wrong, and there’s nothing more a policy maker in this situation can do. Maybe politics are the impediment, and Chairman Bernanke has been forced to hide his inner professor. Or maybe the onetime academic has been assimilated by the Fed Borg and turned into a conventional central banker. Whichever account you prefer, however, the fact is that the Fed isn’t doing the job many economists expected it to do, and a result is mass suffering for American workers.
These guys know that bailing out the rich while leaving the poor and middle class to suffer is the wrong policy. Maybe Ayn Rand devotee Greenspan didn't know that, but at least Ben Bernanke does. And yet it happens anyway.
One can argue that Bernanke and friends are personally corrupt, and that's possible. But it's also possible that the system itself is so rigged against doing the right thing that people who have made their careers out of proposing mostly the right policies find themselves trapped into doing the wrong things. Washington is corrupt, but it's difficult to believe that everyone in power is that corrupted--unless every single one of us is a lot more corruptible than we believe. I tend to think the problem is systemic.
Which answer is the right one makes a huge difference in terms of how one goes about solving the problem.