Wednesday, March 30, 2016

[1st_CB] Federal Reserve Bank

I strongly recommend a documentary film, "Money For Nothing: Inside the Federal Reserve". The film and its trailer are available at Amazon.com (http://goo.gl/PE5TUD). Last year, I watched this film several times. This video will cultivate your understandings of Federal Reserve Bank and financial crisis in 2008. This one was free when I watched last year, but it requires a payment. If I find enough people interested in this film after watching the trailer, I will find ways to show this video in my facilitator week (week2). Please leave a comment after watching the trailer.

I also suggest all classmate to give a brief glance to "The Financial Crisis Inquiry Report" (https://goo.gl/XNQbnu). This report was officially written by The Financial Crisis Inquiry Commission under the U.S. government. In the report, the commission presented succinct conclusions why the financial crisis happened. Interestingly, the commission acknowledged that the financial crisis in 2008 was avoidable. Please share your comment how this report changes your original knowledge towards the Financial Crisis.

The commission stated "the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public"(PDF file 18 page out 663). This part of conclusion leads me to think "Did Ben Bernanke do a great job as the chairman of FRB before the Financial Crisis?" (He was appointed as the chairman in 2006). If the Financial Crisis was avoidable and Ben Bernanke was the one leading the FRB just before the Financial Crisis, shouldn't Bernanke partially deserve blames for letting the Financial Crisis happened? The following article from Chicago Tribune might expand your insight (http://goo.gl/jyQvzi)

I do not negate Bernanke's great job on preventing further recession. However, I would like to discuss whether Bernanke only deserves credits for defending us from the Financial Crisis. What is your opinion?


7 comments:

  1. I think that evaluating Bernanke's performance as Fed chair is a difficult task. One side of the argument is that Bernanke's term preceded the crisis and therefore he should have had sufficient time and resources to take action. Bernanke was on the Freakonomics podcast a few months back where he was asked to give his Fed term a grade. He doesn't settle on a specific letter grade, rather he says "C- or A-, something like that". I like how Bernanke brushes off the question because he is essentially saying that it wasn't his fault, but he did a decent job putting the pieces back together. I don't think there was a whole lot that could have been done about the housing market by the Fed because the issues were too widespread to be solved by monetary policy. Link to Freakonomics interview:http://freakonomics.com/podcast/ben-bernanke-gives-himself-a-grade-a-new-freakonomics-radio-podcast/

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    1. Anthony, I agree mostly with the last point you made, that there wasn't a ton that the Fed could do in order to prevent the recession. From what I understand (and I could be incorrect), the crisis was more closely related to the private sector, which seemed to be out of his control. In my eyes, big banks should take more of the blame than anyone, since it was poor lending that caused the recession to begin with. I'm not sure it's within Bernanke's power to prevent this from occurring, but I do think that it is within the power of congress to do so. Therefore, I don't think he's wrong in saying that it wasn't his fault, but he did help fix the problem. You're completely right in saying that it's difficult to evaluate Bernanke's performance leading up to the recession, but I suppose that his actions afterwards merited an A-!

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  3. As Anthony mentioned before, it is very difficult to evaluate Bernanke's performance as the chairman of the Federal Reserve. With that being said, I find it interesting that even though the Federal Reserve widened their scope considerably under Bernake, inflation/deflation was not relatively static during the Great Recession. I am not sure if that is a result of Bernake's good or bad performance.

    Link: http://www.usinflationcalculator.com/inflation/current-inflation-rates/

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  4. I agree with Anthony and Kenny in that it is difficult to evaluate Bernanke's performance. One one hand as the chair of the Fed, he does bear at least partial responsibility for the crisis, but it is unfair to blame it completely on one man, just as it would be inappropriate to credit only him for the policies that helped limit and fix the crisis.
    However I do find it interesting that in an article by the Boston Globe, Bernanke still defends the actions the FRB took before the crisis started. Bernanke argues that the policies in place helped the U.S recover more strongly than other countries and he also places blame on Congress and political leaders for not doing enough to prevent the crisis. In addition he argues that too much responsibility for the recover was put on the Fed without enough action from the Congress. I feel that while it may be easy to place the blame on one person, the financial crisis was caused by lack of awareness and action by multiple parties, and therefore it can be tricky to accurately evaluate Bernanke's performance.

    https://www.bostonglobe.com/business/2015/10/13/ben-bernanke-defends-fed-actions-during-financial-crisis/vVGrnnjNwDlPmk1yR7r14N/story.html

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