STEVE INSKEEP, HOST:

The Federal Open Market Committee meets this week. That's the group of key officials at the Federal Reserve who together are supposed to make many of the Feds most vital decisions.

RENEE MONTAGNE, HOST:

This week's meeting is the first of the year and the last to be run by Ben Bernanke. As the Fed chairman departs, the Fed is widely expected to do more than just say goodbye. It's expected to continue scaling back its bond-buying program.

INSKEEP: That program has been a key part of the Central Bank's efforts to spur economic growth since the financial crisis. Maybe the story getting the most attention, though, is that by the end of this week there will be a new leader at the Fed. In five days, Janet Yellen takes over. She is the first woman ever to lead the nation's central bank. So let's look at Ben Bernanke's legacy as he goes away. NPR's John Ydstie has a first draft.

JOHN YDSTIE, BYLINE: There's no doubt that during his two terms as Fed chairman, Ben Bernanke faced a challenge unlike any Fed chairman since the Great Depression: a global financial crisis that threatened to become financial Armageddon, followed by a deep recession. Bernanke talked about how he survived it all during an appearance at the Brookings Institution recently.

BEN BERNANKE: I was so absorbed in what was happening and trying to find response to it that I wasn't really in that kind of reflective mode. I mean later on, you know, it's kind of like, you know, if you're in car wreck or something, you're mostly involved in trying to avoid going off the bridge and then later on you say, oh my god, you know, but...

YDSTIE: One of the passengers in that careening car has strong views on how well Bernanke did his job.

HENRY PAULSON: Wow. You know, he's - I think he's going to go down as one of the greatest Fed chairmen of all times.

YDSTIE: That's former Treasury Secretary Henry Paulson, who worked arm-in-arm with Bernanke to keep the financial system from total collapse.

PAULSON: He made tough, courageous, sometimes unpopular decisions, which I think were necessary to avoid economic catastrophe and prevent a second Great Depression.

YDSTIE: And Bernanke's decisions were also extremely creative, says Harvard economist Ken Rogoff.

KEN ROGOFF: I remember waking up the morning that they had turned the investment banks into ordinary banks so they could lend them money and think, Am I living in an alternate universe? This is crazy that places like Goldman Sachs and Morgan Stanley, which do these fancy operations, we're going to call them banks. But it was a very creative way to try to prevent a complete implosion in the system.

And they did these things with saving the money market fund. They're not supposed to back the money market funds. They did, and it - I think it helped save the system.

YDSTIE: Rogoff, who has studied and written about the aftermath of financial crises, says a hundred years from now economists may still be marveling at what the Bernanke Fed did. There are some critics of Bernanke's decisions during the crisis. Vincent Reinhart, a top staff member at the Fed under both Alan Greenspan and Ben Bernanke, says the popular but in his eyes mistaken version of events is that the global financial system was hit by a perfect storm and the Fed came to the rescue.

VINCENT REINHART: And the vision then we have is Ben Bernanke in the yellow slicker, fighting the elements to keep the ship of the economy afloat. I think that's the wrong metaphor, because policy actions influenced the course of the storm.

YDSTIE: And, Reinhart says, actually made the financial crisis worse. Specifically, Reinhart has argued that Bernanke, Treasury Secretary Paulson and Timothy Geithner, then the president of the New York Fed, made a big mistake when they decided that the government should aid in the rescue of the Wall Street bank Bear Stearns back in March of 2008.

REINHART: Policymakers didn't seem to explore enough alternatives before they arrived at the conclusion that they should lend to an investment bank for the first time in 60 years.

YDSTIE: Reinhart says that set up the panic of September of 2008, when the government failed to rescue another big investment bank, Lehman Brothers. Alan Blinder, a former vice-chairman of the Fed and colleague of Bernanke's at Princeton, thinks he was a terrific chairman, but Blinder doesn't give him a perfect grade.

ALAN BLINDER: Oh, I have to give him an A-minus, and the minus is the Lehman Brothers.

YDSTIE: Bernanke responded to the criticism over the Lehman's collapse in an interview on CBS's "60 Minutes" in March of 2009.

(SOUNDBITE OF TV SHOW, "60 MINUTES")

BERNANKE: There were many people who said, Let 'em fail. You know, it's not a problem. The markets will take care of it. And I think I knew better than that. And Lehman proved that you cannot let a large, internationally active firm fail in the middle of a financial crisis. Now, was it a mistake? It wasn't a mistake for the following reason: We didn't have the option, we didn't have the tools.

YDSTIE: The legal tools, that is. Blinder says the legal argument was that the Fed couldn't lend to Lehman to prop it up because the bank didn't have enough solid collateral.

BLINDER: And therefore it was illegal for the Fed to extend credit to Lehman Brothers, as it had six months earlier to Bear Stearns.

YDSTIE: Blinder thinks the Fed could have found a way around the legal obstacles, given the immense stakes. After the financial crisis subsided, the Bernanke Fed also took extraordinary action to try to stimulate growth, including pumping money into the financial system by purchasing $85 billion a month in government bonds and mortgage-backed securities.

The aim was to reduce long-term interest rates. Critics warned it could lead to financial bubbles. And indeed many analysts believe it helped fuel a run-up in the stock market. That, along with the rescue of Wall Street banks, has led to charges that Bernanke's Fed cared more about Wall Street than Main Street and hard hit homeowners. Bernanke rejected that assessment during his recent Brookings appearance.

BERNANKE: There certainly has been pushback. We hope that as the economy improves, and as we tell our story and as more information comes out about, you know, why we did what we did and so on that people will appreciate and understand that what we did was necessary, that it was in the interest of the broader public. It was aimed at helping the average American.

YDSTIE: Telling the Fed's story more successfully and better communicating its policies was a goal for Bernanke when he took over the chairmanship in 2006, even before the financial crisis. He has made great strides at that, including instituting regular news conferences to help explain Fed policy decisions. Here he is at the first every news conference by a Fed chairman in April of 2011.

BERNANKE: I personally have always been a big believer in providing as much information as you can to help the public understand what you're doing, to help the markets understand what you're doing, and to be accountable to the public for what you're doing.

YDSTIE: Former Treasury Secretary Paulson says given the extraordinary circumstances he faced, Bernanke has left a remarkable legacy.

PAULSON: And I think very importantly, he's leaving the Fed with its independence and credibility intact, and that's no small accomplishment given the extraordinary things both he and the Fed were forced to do.

YDSTIE: On Friday, Ben Bernanke will step down from what many view as the second most powerful job in America and become a private citizen again. John Ydstie, NPR News, Washington.

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