This week, the Royal Swedish Academy of Sciences awarded ex-Federal Reserve banker Ben Bernanke and economists Douglas Diamond and Philip Dybvig with the 2022 Nobel Prize in Economics. The trio was recognized for their research surrounding the relationship between banks and economic turmoil –– a point that several onlookers found distasteful, considering Bernanke’s connection to the 2008 global financial crisis.
“The laureates have provided a foundation for our modern understanding of why banks are needed, why they’re vulnerable, and what to do about it,” wrote John Hassler, a Stockholm University economist and a member of the prize committee.
Despite the committee’s praise, social media quickly flowered with criticism. Investigative reporter Matt Taibbi, who scathingly covered the bailouts received by the financial heavyweights responsible for plunging the world into economic turmoil, tweeted several stark responses directed at Bernanke’s achievement:
The numbers talk. Bernanke’s time at the head of the US financial system saw over 10 million people become homeless and a doubling of the US unemployment rate, in tandem with a $16 trillion financial aid package to the Wall Street banks at the epicenter of the collapse. These are just US figures, mind you –– the complete global impact of Bernanke’s ‘work’ is difficult to estimate.
Irina Tsukerman, a business analyst who heads Scarab Rising, told the New York Post that Bernanke’s critics have a point:
“The 2008 global financial crisis came about as a result of a ‘perfect storm’ [of] predatory lending of low-income homebuyers … which encouraged borrowing and mortgages for people who could not afford them” as well as “excessive risk-taking by banks and other global financial institutions,” Tsukerman told The Post. According to her, Bernanke’s tenure directly contributed to ‘all three factors.”
“Now Bernanke is getting a Nobel Prize for encouraging irresponsible fiscal behavior at a time of global inflation and after many years of US government following his example by printing Monopoly money,” Tsukerman said.
Several other businesspeople chimed in with disappointment:
Some feel that the criticism is unwarranted, however. Bernanke himself believed that he and his colleagues helped prevent a broader financial meltdown. “I strongly believed that if that happened, that would bring down the rest of the economy,” he said, adding of his research, “It did help me to think about these issues in 2008.”
The New York Times, which favorably covers many of the key figures in the collapse, dived deep into the Nobel report, which brings up Bernanke’s long history –– including his comments on bank crises in an influential 1983 paper. “I strongly believed that if that happened, that would bring down the rest of the economy,” Bernanke said, adding of his research, “It did help me to think about these issues in 2008.”
Bernanke was also asked about advice to young economists, giving a pretty tongue-in-cheek answer in response:
“One of the lessons of my life is, you never know what is going to happen,” he said.
Lead Image: United States Federal Reserve