Originally appeared in The New York Times.
Ben S. Bernanke ascended to the chairmanship of the Federal Reserve eight years ago as a little-known — albeit distinguished — Princeton economics professor who had notched just three years of federal public service.
When he takes his leave this week, having presided over his final meeting of the Fed’s policy-making committee, he will depart as one of the finest chairmen in the institution’s hundred year history, having played a central role in averting a financial meltdown and lifting the nation out of recession.
Mr. Bernanke’s success may seem particularly surprising because before assuming the Fed chairmanship, the closest he had ever been to a financial crisis was his academic research into the Great Depression.
Indeed, the economic climate during his early service under President George W. Bush — who named him a Fed governor, then chairman of the Council of Economic Advisers and then finally Fed chairman — was so benign that in 2004, Mr. Bernanke erroneously called the era one of “Great Moderation,” in which economic policy had helped tame the business cycle.
But when the Great Moderation abruptly ended soon after his arrival as chairman in 2006, Mr. Bernanke shifted to crisis-fighting mode and proved that his first-rate mind was matched by a first-rate temperament.
A key to his success was a nonideological approach that allowed him to take on each fresh challenge unshackled to a particular dogma. Similarly, even though he lacked major leadership experience — as well as any panache — he proved a calming and confidence-building figure to politicians, colleagues and the bevy of Fed watchers.
And his collegial style allowed him to work effectively with two other extraordinarily capable architects of the rescue: Henry M. Paulson Jr., Mr. Bush’s final Treasury secretary, and Timothy F. Geithner, president of the Federal Reserve Bank of New York and later President Obama’s first Treasury secretary.
These men first threw out the playbook from past crises as inadequate to the current challenge and then threw out the rule book, as they formulated innovation after innovation to fight the conflagration.
Most notable were the 2008 rescue of the insurance giant A.I.G. and the alphabet soup of programs designed to pump liquidity into the frozen financial system.
I had a glimpse of Mr. Bernanke’s pragmatic approach as he helped President Obama’s auto task force, which I then headed, navigate the complex world of car financing in the face of obstacles erected by more sharp-elbowed regulators like Sheila C. Bair, the head of the Federal Deposit Insurance Corporation.
To counter the recession, Mr. Bernanke championed cutting interest rates to zero. But when even that proved insufficient, the Fed began its highly controversial program to buy Treasury and other debt as a means of lowering financing costs and stimulating growth.
This program, known as quantitative easing, brought a chorus of criticism down on Mr. Bernanke, ironically, mostly from Republicans.
An unusually large group of 30 senators — an equally unusual coalition of inflation-obsessed conservative Republicans paired with liberal Democrats who felt the Fed favored the financial community — voted against his confirmation to a second term, in 2010.
And in a November 2010 letter in The Wall Street Journal, 24 well-known, conservatively inclined economists, financiers and academics decried the asset purchase program as risking “currency debasement and inflation” while not promoting employment.
Well, the group proved wrong on all counts. The program has succeeded in lowering interest rates without causing inflation — prices were up just 1.5 percent last year.
Meanwhile, John C. Williams, president of the Federal Reserve Bank of San Francisco, noted at a recent Brookings Institution symposium on monetary policy that unemployment may have been pushed down by a quarter of a percentage point — roughly 400,000 jobs — by just the second phase of quantitative easing.
To be sure, in parallel with mispronouncing the Great Moderation, Mr. Bernanke missed the housing bubble. “We’ve never had a decline in house prices on a nationwide basis,” he said in 2005 while serving in the Bush White House.
Similarly, after joining the Fed, Mr. Bernanke and his colleagues failed to detect the onset of recession. And before the crisis, the Fed, under both Mr. Bernanke and his longstanding predecessor, Alan Greenspan, was lax in its regulatory responsibilities.
But on balance, Mr. Bernanke’s reign was a godsend. In addition to his policy successes, he brought a measure of transparency to an overly opaque institution, even instituting quarterly news conferences.
Importantly, he also deserves praise for being unusually outspoken (by the standards of Fed chairmen) about the nation’s poor fiscal policy, and particularly the too-rapid speed at which the deficit has been reduced, which exacerbated the tepidness of the recovery.
At an early January meeting of the American Economic Association in Philadelphia, Mr. Bernanke’s farewell address was followed by a standing ovation, symbolic of the standing ovation he deserves from the entire country.
