Before I answer that question, let me recommend Mike Grunwald's excellent cover story for the Person of the Year issue. It's a great introduction to Bernanke for readers who aren't economics or finance nerds, but you'll find it compelling even if you are such a person. I especially agree with Grunwald's verdict on Bernanke as crisis-manager:
None of this was pretty, and reasonable people can disagree about the judgment calls. The Fed is supposed to lend only against safe collateral; the Bear and AIG deals clearly crossed the Rubicon into risk. Letting Lehman fail nearly croaked the global economy. Saving AIG — an insurance company! — the next day seemed strangely inconsistent. Maybe the Fed could have devised a way to restrict bonuses at rescued firms while giving creditors haircuts. Maybe TARP could have required bailed-out banks to lend more. Certainly, all the interventions created moral hazard, sending a perverse message that "too big to fail" financial firms will be rescued no matter how badly they screw up, encouraging Wall Street traders to start gorging on risk again.
But that's what happens in panics when leaders actually try to preserve the financial system. The central bankers of the 1930s avoided moral hazard but betrayed the world. ... Now that the fire is out, it's easy to attack the firefighters for getting the furniture wet or holding their hoses improperly. [emphasis added.]
There was one sure way to not be overly-generous to fat-cat bankers, and that was to let them fail. Unfortunately, that would have also collapsed the supply of money and credit, which happens to be a sure-fire way to create a Depression. Conversely, if you're determined to prevent a Depression, then there's no way to do it without being overly-generous to the fat-cats, at least when you have the collection of too-big-to-fail institutions we had last fall. Now that doesn't mean you don't reform the system to avoid ending up there again. But those were the choices we actually faced. Given that, it's hard to believe anyone would have preferred that Bernanke make a different call.
Having said all that, should Bernanke have been person of the year in 2009?
Today's big financial story is the TARP inspector general report criticizing the New York Fed for not negotiating a better deal with all the banks--like Goldman and Merrill Lynch--whose mortgage-backed securities AIG had effectively insured, and to whom it owed big money once the market melt
Should the FDIC tap banks or taxpayers for needed funds?
WaPo: the FHA's reserves will soon drop below required levels.
Megan McArdle puts chances of healthcare bill passing at 75%.
