TORONTO – Former Federal Reserve chairman Ben Bernanke says he believes the U.S. economy is heading towards a recovery from the crippling downturn of the 2008-09 financial crisis.
“We are making considerable progress,” Bernanke said during a speech Tuesday to the Economic Club of Canada.
“Many of the headwinds that came from the crisis, from policy and housing, are beginning to dissipate.”
Bernanke offered his view on the speed of the U.S. recovery during the session, which focused primarily on the historical context of the most recent economic downturn, but he also managed to keep his trademark sense of humour.
He made his entrance on stage to the guitar riffs of AC/DC’s “Thunderstruck” as if it was just another day for one of the world’s most prominent economists, and when asked about what his biggest regret was as head of the central bank he didn’t hesitate for a moment.
“Taking the job,” he joked, receiving a burst of laughter from the audience.
But most of the conversation held a serious tone as he reflected on his role as head of the Federal Reserve, from 2006 until last year, where he helped navigate the United States through the global financial crisis.
The central bank, and most economists, failed to predict the most recent financial crisis, which blindsided investors and left the global economy in shambles.
Bernanke said that’s one area where he believes the Federal Reserve could have done a better job, because it didn’t “identify all the aspects of the crisis” at the time.
“In the fog of war, there are many things we did that were imperfect,” he said.
Since the downturn, the Federal Reserve has revamped its internal structure in various ways that will help prevent big surprises in the global economy in future, Bernanke said.
“It’s monitoring developments across the financial system, including areas where the Fed itself is not the regulator, to try to understand whether there might be problems evolving,” he said.
Under Bernanke’s leadership, the central bank injected trillions of dollars into the economy, such as through emergency lending programs to corporations and banks, and kept interest rates near record lows to help stimulate growth.
More recently, the Fed is cutting back on bond purchases, one of the key measures that have kept long-term rates low and supported a strong rally on stock markets.
Bernanke also suggested the Federal Reserve should have done a better job in helping people understand the action it took during the 2008-09 financial crisis.
“They (the public) think somehow or another that we favoured Wall Street instead of favouring Main Street and that’s unfortunate,” Bernanke said during a question-and-answer session after the speech.
“One of the challenges still out there is to help people understand why stabilizing the financial system . . . was so important,” he said of the Fed’s moves to bail out the financial sector.
Appearances on TV news shows like “60 Minutes” and at speeches to U.S. colleges were supposed to help make the central bank’s reasoning clear, though Bernanke isn’t confident that it was as successful as it should have been.
“I still think there are a lot of people out there who really don’t understand why we did what we did,” he said.
Bernanke left his post at the central bank in February, taking a job as an economist at the Brookings Institution, an independent research organization headquartered in Washington.
Janet Yellen has replaced him as head of the Federal Reserve.