You often see the head of the Federal Reserve testify before Congress and give speeches to economists. But national TV interviews like the one Bernanke gave 60 Minutes this weekend are pretty rare. The interview is a sign that, with all the criticism the Fed has faced lately, Bernanke feels a strong need to do some PR -- to make the case for what the Fed is doing right now.
The other thing he's doing in the interview is really asserting the Fed's independence. He's basically telling investors to disregard the Fed's critics, who say the $600 billion quantitative easing program is an overreach that puts the U.S. at risk of high inflation. Not only does Bernanke stand behind the program; he says there could be more to come.
Here's the key exchange with the interviewer, Scott Pelley:
Pelley: Do you anticipate a scenario in which you would commit to more than $600 billion?
Bernanke: Oh, it's certainly possible. And again, it depends on the efficacy of the program. It depends on inflation. And finally it depends on how the economy looks.
Bernanke, a scholar of the Fed's mistakes during the Great Depression, argued in the interview that bailing out the banks in 2008 prevented a catastrophe on the scale of the Depression. If the Fed hadn't given the banks emergency loans, he said,
Unemployment would be much, much higher. It might be something like it was in the Depression. Twenty-five percent. We saw what happened when one or two large financial firms came close to failure or to failure. Imagine if ten or 12 or 15 firms had failed, which is where we almost were in the fall of 2008. It would have brought down the entire global financial system and it would have had enormous implications, very long-lasting implications for the global economy, not just the U.S. economy.
Of course, the Fed was supposed to be keeping an eye on the big banks before the crisis, but failed to see the magnitude of the problems in the system.
Bernanke pointed out that the Fed didn't have oversight of some key players -- AIG, Lehman Brothers. But he added:
Now, I'm not saying the Fed should not have seen some of these things. One of things that I most regret is that we weren't strong enough in putting in consumer protections to try to cut down on the subprime lending problem. That was an area where I think we could have done more.