Bernanke’s Fed escaped any consequences for its failed crisis forecasting and bailouts

Evidence

Ben Bernanke is one major character study in the syndrome of denial that has gripped the orthodox economics profession. All that flimflam about the “Great Moderation” has been blessedly forgotten by the Fed chair, though never actually repudiated. Bernanke insists upon the prodigious intellectual capacity of the Fed to regulate the postcrisis financial sector and the shadow banking sphere, even though he and his former lieutenant at the New York Fed Timothy Geithner had been asleep at the wheel in the run-up to the crisis, and then outsourced much of the bailout. Bernanke has stood in the way of most attempts to restructure the U.S. financial sector, from opposing the Volcker Rule to blocking attempts to break up “too big to fail” firms. Bernanke resisted most attempts to financially penalize banks or hedge funds, with the excuse that they were too fragile to face the music. The Fed’s ability to even anticipate contractions had been persistently addled, dating from the onset of the crisis, as demonstrated in Figure 4.5. His grasp on reality has been tenuous: Bernanke himself had insisted that the subprime mortgage crisis was “contained” as late as March 2007. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 513

Categorization

• XREF: Direct instance of the ‘Great Bank Amnesty’ and thought-collective denial the book argues is central to how neoliberalism survived 2008. — connects to: Banks with Fed directorships were more likely to receive TARP funds — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 2083; The Fed issued conflict-of-interest waivers and no-bid contracts to favored banks during the crisis. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 510; Economics escaped crisis blame because the banking sector it protected escaped unscathed — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 555 (+2 more)

Broader Connections

• Economics escaped crisis blame because the banking sector it protected escaped unscathed #expands (0.80) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 555
• Letting banks fail produced better outcomes than bailouts in 2008 #contradicts (0.75) — Mark Blyth, Austerity, 622
• Economists had no consensus explanation for the 2008 financial crisis #corroborates (0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 448