Europe Turns On The Bat Signal : Planet Money On today's podcast, European leaders want the European Central Bank to save the currency union. But the ECB is a reluctant superhero.

Europe Turns On The Bat Signal

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript


VAL KILMER: (As Bruce Wayne) Alfred.

MICHAEL GOUGH: (As Alfred) I saw the signal, sir. Always ready.

KILMER: (As Bruce Wayne) Are all the Batsuits destroyed, Alfred?

GOUGH: (As Alfred) All except the prototype with the sonar modifications you invented. But you haven't tested it yet.

KILMER: (As Bruce Wayne) Tonight's a good night.


RIVERS CUOMO: (Singing) I got the magic in me. Every time I touch that track it turns into gold. Everybody knows I got the magic in me. When I hit the floor, the girls come snapping at me. Now everybody wants some presto magic, magic, magic, magic, magic, magic...


Hello and welcome to PLANET MONEY. I'm Robert Smith.


I'm Zoe Chace. Today's Tuesday, Dec. 6. And that was Alfred and Bruce Wayne you heard at the top, responding to the Bat Signal by putting on his Batsuit.

SMITH: That's what's going on in Europe right now. The Bat Signal is reflecting off the clouds. European governments are desperate. They've all turned their eyes skyward looking for a hero, someone to save the continent from a financial collapse that would make Lehman Brothers look like a toppled sandcastle.

CHACE: But the signal in the skies over Europe is not the usual one in the shape of a bat, it's the initials ECB, European Central Bank. Today we'll tell you about their superpowers and why they are reluctant to help us mere mortals in trouble. First, the PLANET MONEY indicator from Caitlin Kenney. Hey, Caitlin.

CAITLIN KENNEY, BYLINE: Hey, guys. Today's PLANET MONEY indicator is 15. Standard & Poor's, the rating agency, has placed 15 eurozone countries on credit watch for a possible downgrade. Also on their list for a possible downgrade, the European bailout fund, the EFSF. Now, this doesn't mean that any of the countries are definitely going to be downgraded or the EFSF. It's basically just a warning shot.

CHACE: See, I saw this when it came out yesterday, and I just thought it was so funny because S&P, like, all they want to do is just rain on the parade. Like, the European leaders are together right now. They're all excited. And then the S&P just trots out this warning. It's just a warning, right?

KENNEY: Yeah, but basically, what they're trying to do is just put the pressure on even more. They're saying, listen. Whatever comes out of this little summit of yours that you're having at the end of the week, it better be good because otherwise, we're going to downgrade you. And it was funny, I was reading their press release, and they're actually pretty harsh. They called what the policymakers in Europe have done so far defensive and piecemeal measures.

SMITH: Oh, snap.

CHACE: (Laughter) I know. It's really bad.

KENNEY: Yeah. And the reason, of course, that this could be a bad thing is, as we know and we've talked about so much here on this podcast, these countries are already having so much trouble borrowing money. And if they're downgraded, it could make that even harder for them.

SMITH: But isn't it a little late to be talking about downgrade? I mean, we've known about these problems for months. There's no real new data available on this.

KENNEY: No, that's true. But basically, they're just trying to get out ahead of this because a lot of people are saying right now, and the feeling seems to be, that if what comes out of the summit at the end of this week isn't good enough and doesn't make people feel comfortable that Europe is going to be saved, it could be a real disaster. I mean, things could get really scary. And so the S&P is coming out and saying listen, if you don't do anything good enough, we're definitely going to downgrade you.

SMITH: All right. Thanks, Caitlin.

CHACE: Thanks, Caitlin.

KENNEY: Thanks guys.

SMITH: And onto the podcast. It's a bird. It's a plane. Well, I think today we're going to talk about a different kind of hero. It's a central bank. Now, every country with a currency has some sort of central bank. They issue money, and they control the money supply.

CHACE: But the central bank we want to talk about goes by the initials ECB, European Central Bank. And anytime you hear about the crisis in Europe right now, you'll always hear them mention those three little letters, the ECB, usually in a phrase that goes something like, oh, my God...

SMITH: Oh, my God.

CHACE: ...The economy's going to collapse.

SMITH: Help us.

CHACE: Help us, ECB. Help us. Or as a European president might put it...


PRESIDENT ANIBAL SILVA: So I'm still in favor of a more aggressive attitude from the European Central Bank and not just a narrow interpretation of its mission.

CHACE: We want more aggressive attitude from the ECB and not just a narrow interpretation of its mission. And that's the Portuguese president, Anibal Silva. And on the podcast today, we'll be translating why what he said actually amounts to begging for help from the ECB.

SMITH: Trust us. That is what he's saying. Help us. Help us, ECB. What's weird, though, is that in Europe right now, the central bank - the European Central Bank - doesn't want to be this big superhero. Imagine Bruce Wayne or Peter Parker or Clark Kent, and they have these powers, and they're like, you know what? I'm not really interested in fighting crime right now. In fact, why are you even coming to me? That's the attitude of the ECB. Just listen.


MARIO DRAGHI: We are not forced by anybody, really. We are independent. We make up our own judgment. So that's it.

CHACE: That's Mario Draghi, the head of the ECB. And what he said right there about independence - that has created a huge dilemma. People all over Europe, on the one hand, calling for the ECB to help. And then on the other hand, the ECB saying, your puny calls for rescue aren't really going to sway me. That's at the center of this whole dynamic in Europe. And we're going to explain that dynamic on the podcast today.

SMITH: We are going to geek out on central banks.


SMITH: And not just the ECB. We're going to talk about another central bank, our very own Federal Reserve, that actually does think it's a superhero that can save the world.

CHACE: So first, if the ECB and the Fed really are, under those suits, superheroes, what is the power that they have?

SMITH: Does it come from the yellow sun here on Earth or the extraterrestrial ring of power? What is their power, exactly? We called David Beim, who teaches classes on international banking at Columbia University, and he agreed to play along.

DAVID BEIM: There is one fundamental superpower that a central bank has, and that is they manufacture the money. And if there is a shortage of dollars to go around, the central bank is the only one that can manufacture the dollars or the euros or whatever other currency you need.

CHACE: The Fed, the only one who can create dollars. The ECB, the only one who can create euros.

SMITH: And we're only half joking when we refer to it as a superpower because when you think about it, it is rather amazing. Central banks can, at the push of a button, create not just $1, $10, million dollars. They can create a trillion dollars. These are zeros that appear on computer screens, and they are effectively money that can change the world.

CHACE: So that's the superpower. Now, what do people want the ECB to do with that superpower? As you've heard, doubtless, there's a crisis in Europe. And the crisis comes down to this. The world has grown uncomfortable with lending a lot of countries in Europe money. They don't want to lend to Greece, to Ireland, to Portugal. Increasingly, they don't want to lend to Spain or Italy. Lately, they don't really want to lend to France and kind of Germany.

SMITH: So we have these countries, basically, that are having trouble getting money. If only there were someone who could create money out of thin air.

CHACE: We asked Beim about this.

SMITH: When people say, oh, European Central Bank, help us, help us, what they're really saying is just make up money out of thin air and use it to plug our holes in Greece and Italy and Portugal and...

CHACE: Ireland.

SMITH: ...Spain and - the list goes on and on.

CHACE: That's right.

SMITH: They're just saying just keep the presses going 24 hours a day...

BEIM: That's right.

SMITH: ...Until all the holes are plugged.

BEIM: Exactly. And so nobody quite puts it as dramatically as that. They say, oh, just this one time. We're getting ourselves straightened out. Couldn't you just this one time make a little room for our bonds on your balance sheet?

CHACE: Make room for our bonds on your balance sheet. Sounds intimate. What it is is a fancy way of saying, central bank, lend the countries of Europe your money to tide us through this crisis.

SMITH: So what we have so far is a classic comic book scenario. Somebody needs help, and we have a superhero with just the right superpower to save them.

CHACE: Mario Draghi, the head of the European Central Bank - he looks up from his morning paper. He sips his espresso. He sees the Bat Signal in the sky and goes back to sipping his espresso. Not my job.


DRAGHI: The way to react to this is not so much to count on external help.

SMITH: So this is strange enough on its face - a superhero declining to act in a crisis. But it's even stranger when you consider what happened in our own financial crisis here in the United States with our own superhero, the Fed, the U.S. Federal Reserve. A couple of years ago, when our financial crisis was looming, people made these same appeals to the Fed for help. But this being America, it came from blowhards on cable television.


JIM CRAMER: Bernanke needs to focus on this. Listen. Open the darn Fed window. He has no idea how bad it is out there. He has no idea. He has no idea.

CHACE: This is Jim Cramer, the hyper CNBC guy, the host of "Mad Money."

SMITH: You could hear the sound effects there he was firing out.

CHACE: This is back in the early days of the crisis. Listen, if you can, to exactly what he's yelling. Just play it back real quick.


CRAMER: Open the darn Fed window. He has no idea.

SMITH: Open the darn Fed window. What that means is, Ben Bernanke, chairman of the Fed, use your power to create money and lend that money to those who need it. In this case, it was the large Wall Street firms who had gotten themselves in a bit of trouble with mortgage related financial products. They couldn't get anyone to lend the money. And open the Fed window means please, central bank, give it to us.

CHACE: It took some time - like, a couple of months - but eventually, Bernanke did take that call and did come to the rescue in a huge, huge way.

SMITH: And as we said with the superpowers, they managed to create trillions of dollars out of thin air. And the Fed lent it all over the place, all over the world, to companies, to banks, to Wall Street investment firms, anyone who came to them in the middle of the night - European banks - and said, listen. We're not going to be able to open tomorrow morning without a significant amount of money. They just pressed a button in the Fed. Boom. They got it.

CHACE: So there's a huge debate about whether the Fed was using their power for good or for evil. Were they a superhero or a supervillain? Here's how the people at the Fed saw it. And many experts do agree with them. This action kept the country from falling into a Great Depression. By lending the banks some money to get them through a rough spot, the banks got back on their feet, and the financial system that we know and love was preserved.

SMITH: So we've just told you the story of two central banks, the ECB and the Fed. They're facing the same sort of crisis. They have the same power to print money. And yet one, the Fed, boldly acted. They used their power.

CHACE: And the other demurs.

SMITH: And, you know, Zoe, you can always explain the difference between superheroes by going back to their origin stories, to their founding myths. So, like, Spider-Man - he let a mugger get away, and that mugger ended up killing his beloved Uncle Ben. And that failure to act haunted Peter Parker and propelled him forward to become the Spider-Man. So these two central banks - they also have their never-again moments, their moments that propel them forward.

For the Fed, that thing, the thing that haunts them in their dreams and makes them become a superhero, is the Great Depression. The Great Depression is seen as this famous example of a huge mistake by the Federal Reserve. The bank was still in its youth, only about 20 years old. And the country was on the brink of economic collapse. The Federal Reserve did not act boldly back then, and the country suffered for years.

CHACE: Even Ben Bernanke, a noted expert on the Great Depression - he once said to Milton Friedman, the famous economist, you're right. We screwed up back then. So for Bernanke, never again. Basically, not on my watch.

SMITH: Or as Uncle Ben would put it, with great power comes great responsibility. So when the financial crisis came around again recently a few years ago, the Federal Reserve said, you know what? I have seen this before, and I am not going to let it happen again. For better or for worse, Ben Bernanke acted decisively to bail out the financial system.

CHACE: Now, the ECB has a totally different origin story. They have an exact opposite never-again moment.


UNIDENTIFIED NARRATOR: So whatever figure was printed on the notes really meant nothing. The German mark was worthless. As in a fearful dream, people's life savings were blown away like leaves in a gale.


CHACE: This is an educational video we found on the Internet about the hyperinflation of Germany's Weimar Republic in 1923. This is the ECB's never-again story. And the German government asked the Central Bank, help us get out of debt. Print a bunch of money. And the Central Bank printed so much money that the money was essentially worthless.

SMITH: So think about this. We have two central banks with two radically different origin stories, and so the banks see the world in totally different lights. The Fed - when they see economic trouble, they see financial systems on the verge of collapse. And what they think is, we've got to act quickly. We've got to leap into the breach. We've got to take bold actions.

CHACE: And the ECB - when they see a financial system on the verge of collapse, what they're looking at is a bunch of governments who can't pay their debts, and they want the bank to print money to help them out.

SMITH: So they have this opposite point of view. And, you know, Zoe, how superheroes have their sort of personal credo, their motto? Superman has truth, justice and the American way.

CHACE: And the Green Lantern has his oath - in brightest day, in blackest night, no evil shall escape my sight.

SMITH: Let those who worship evil's might beware my power, Green Lantern's light.

CHACE: Here's how the Fed defines their fight against evil - stable prices, moderate long-term interest rates and maximum employment.

SMITH: No, that sounds boring. You got to do it like a superhero would do it. Stable prices, moderate long-term interest rates and maximum employment.

CHACE: (Laughter) OK, whatever. It goes back to the same never-again. Maximum employment - that's just saying, don't ever go back to the 25 percent unemployment of the Great Depression.

SMITH: Yeah. The ECB - their crime-fighting motto is a little bit different, and it's this. Here. I'm going to have the superhero himself, Mario Draghi, chairman of the ECB, do it.


DRAGHI: Maintaining price stability over the medium term.

SMITH: Yeah. There's no way to make that exciting. Maintaining price stability over the medium term.

CHACE: It's just going to be boring no matter how you say it. And the reason that it's supposed to be totally boring, the - just as the Fed has this broad mandate, the ECB's is really narrow. It boils down to just a number, 2 percent. Prices can rise by no more than 2 percent, and all we care about is avoiding hyperinflation. And you know what? I'll give it to them. They've actually done a pretty good job with that. And they think so, too.


JEAN-CLAUDE TRICHET: We have delivered price stability over the first 12 years and 13 years of the euro impeccably - impeccably.

SMITH: This is the former chairman of the ECB, Jean-Claude Trichet, speaking in September. And remember, September, Europe is crumbling around him. And what he's saying here is, hey, at least bread cost the same every year. Every year, same price.


TRICHET: I would like very much to hear the congratulations for an institution which has delivered price stability over 13 years.

SMITH: So perhaps you're starting to see how this difference came about between the ECB and the Federal Reserve. They - one, they have different origin myths. Two, they have different mottos, different guiding credos. But it's not just the internal psychodramas here that separate the two banks. There is one more crucial difference.

It is a lot easier for Ben Bernanke to act boldly during a financial crisis because, compared to Europe, our central bank in the United States is fairly simple. There is one man in charge, the Federal Reserve Chair, Ben Bernanke. And he has about a dozen people who help make monetary policy in the United States. So it's a simple decision-making body. And you know what? They have one government to deal with, the United States government, one treasury, the United States Treasury.

CHACE: Compare that to the ECB. The difference is obvious. And you can see it if you visit, which I did. Remember, Caitlin and I were in Germany a little while ago. And I went to the ECB. I checked it out even though it wasn't in session. And you can tell.

NIELS BUNEMANN: This is where the meetings of the decision-making bodies is taking place. So...

CHACE: This is Niels Bunemann, and he showed me around. He took me into the room where the ECB makes its decisions. And the ECB is made up from members of every single country in the euro. And you add in the council members, it's 23 people. There's just - it's packed with chairs. OK? And every decision they make is political, including where they actually sit.

Does every country have an assigned seat?

BUNEMANN: That is a question that is more relevant than you probably think, because we have the principle of, let's say, nationalities and countries not playing any role at all. So actually, members of the governing council grouped according to their family name - so alphabetically according to their family name, not according to the country that they would come from.

CHACE: It reminded me of what Kissinger said. If you call Europe, who answers the phone? It's a little Occupy Wall Street in there. The ECB is not dominated by any one country. So Greece has the same vote as Germany. The ECB has to coordinate with 17 different countries, their central banks and their treasuries.

SMITH: So - now, we know that we are vastly oversimplifying things. With central banks, it can get very geeky and very complex. But just to go all the way with this, I'm going to translate this into superhero speak. The Fed is like Superman. Superman has no doubts. Superman has complete confidence. Superman acts, jumps into the breach, makes the decisions fast and easily, even if those decisions turn out to be wrong.

CHACE: The ECB is more like Batman - moody, tortured, complicated, lives by a code but worries if that is enough. I mean, think about it. The ECB has to deal with all these different governments, some of whom think it's an outlaw. No wonder they hesitate.

SMITH: And this fundamental difference explains what we've been hearing out of Europe recently. Sure, people are calling for the ECB to help. But the ECB is saying, listen, it's not that we're not going to act. It's that you've all made it too complicated for us to act. What we need, the ECB is saying, is for governments to simplify things, to streamline things. There needs to be more central authority to make financial decisions so that budget decisions made in Greece can't undermine what happens in Belgium. The ECB is saying, listen, governments, you need to look more like the United States of America. And then - and then - we'll act more like the Federal Reserve.


CHRISTIAN BALE: (As Batman) It's not who I am underneath, but what I do that defines me.

KATIE HOLMES: (As Rachel Dawes) Bruce?


B.O.B.: (Rapping) ...leave you with amnesia. I break all the rules like Evel Knievel. It's a spectacular show because my heart pumps diesel. So whatever you saying, it don't entertain my ego. I do this every day. Hocus pocus is my steelo.

CUOMO: (Singing) I got the magic in me.

B.O.B.: (Singing) I got the magic, baby.

CUOMO: (Singing) Every time I...

CHACE: As always, let us know what you think. Send us an email at

SMITH: And if you are a comic book nerd or a Central Bank nerd, feel free to tell us what we got wrong.

CHACE: (Laughter) Also, our own Chana Joffe-Walt is back in Greece. So please send along anything you're desperate for her to find out. She's in the eye of the storm.

SMITH: You can also find us on Facebook and Twitter. I'm Robert Smith.

CHACE: I'm Zoe Chace. Thanks for listening.


CUOMO: (Singing) Magic, magic, magic. Magic, magic, magic. Ooh, I got the magic in me.

B.O.B.: (Rapping) Hey, that, that - I got that. Hey, I got the magic in me. (Laughter)

CUOMO: (Singing) I got the magic in me.

Copyright © 2011 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.