Former Federal Reserve Chairman Ben Bernanke, speaking in Woodbury Wednesday, said that the United States "is the envy of a lot of other economies" in the world despite stagnant wages and increasing economic inequality.
Bernanke, who headed the central bank during the 2008 financial crisis and ensuing recession, spoke before about 1,000 business people at a Long Island Association luncheon at Crest Hollow Country Club. He said the United States has been growing more than any other industrialized economy and has trimmed its unemployment rate from 10 percent in September 2009 to 5.9 percent today.
"We've come a long way," he said.
He remarks came against a backdrop of wild swings in the stock market this month. on Wednesday, the Dow Jones industrial average recovered much of its losses after tumbling more than 400 points at midday.
Bernanke, 60, who served as Fed chairman from 2006 to 2014 under Republican President George W. Bush and Democratic President Barack Obama, spoke for more than an hour in a casual question-and-answer format with Kevin Law, president and CEO of the LIA, the Island's largest business group.
Much of the discussion focused on Bernanke's role during the 2008 turmoil, which he described as the "worst financial crisis in global history."
He likened the chaos during those months to "the fog of war."
In response, the Federal Reserve and the Treasury Department spearheaded rescues of key financial institutions, including giant insurer American International Group, and helped push the controversial Troubled Asset Relief Program through Congress. He said the moves prevented a collapse of the U.S. economy, and ended up turning a profit for taxpayers, but remain widely disliked by the public.
"At one time, the Federal Reserve was well below the IRS in popularity," Bernanke recalled. "The Fed is still suffering from the political consequences of what we did."
Bernanke, a former chairman of Princeton University's economics department, focused his academic research on the Great Depression. He said innovative action by President Franklin Roosevelt was required to deal with the Depression, just as new thinking was required to cope with the crisis of 2008.
"Sometimes you've got to throw away the playbook and do something new," he said.
Some of the creative solutions to the financial crisis came during "blue sky" sessions that tapped the brainpower of Federal Reserve staffers and experts on specific issues. He likened those sessions to efforts to diagnose medical ailments on the TV show "House."
In the aftermath of the most recent crisis, Bernanke said, the Federal Reserve has increased regulations and capital requirements for "too big to fail" money center banks. "Banks have a lot more capital, a lot more cash on hand" now, he said. That effort to make the banks bear the societal costs of failure, he predicted, will prompt some of the banking giants to downsize operations.