A pharmacist’s son in Dillon
Ben Shalom Bernanke was born on December 13, 1953, in Augusta, Georgia, and grew up on East Jefferson Street in Dillon, a small town in South Carolina near the North Carolina line. His father, Philip, was a pharmacist and part-time theatre manager; his mother, Edna, was an elementary school teacher who gave up teaching when Ben was born to work in the family drugstore. He has a younger brother, Seth, and a younger sister, Sharon.
The drugstore had been bought from Ben’s paternal grandfather, Jonas Bernanke, born in 1891 in Boryslav in Austro-Hungarian Galicia (today in Ukraine), who had come through Ellis Island in 1921 with his wife, Pauline, whose occupation was listed on the ship’s manifest as doctor of medicine. The family moved to Dillon from New York in the 1940s.
One of the few Jewish families in town
The Bernankes were one of only a handful of Jewish families in Dillon and belonged to the local synagogue, Ohav Shalom. Ben learned Hebrew as a child from his maternal grandfather, Harold Friedman, a professional cantor, ritual slaughterer and Hebrew teacher, and as a teenager in the 1960s he helped roll the Torah scrolls in the synagogue. When he arrived at Harvard as a freshman, a fellow Dillon native, Kenneth Manning, took him to Rosh Hashanah services in Brookline.
Bernanke has always kept his religious views private. His friend and frequent co-author, the economist Mark Gertler, has said that his Jewish values are embedded in who he is.
From Dillon to Harvard and MIT
At Dillon High School Bernanke was valedictorian and played saxophone in the marching band. The school did not offer calculus, so he taught it to himself. He scored 1590 out of 1600 on the SAT, was a National Merit Scholar, and as a boy competed in the 1965 National Spelling Bee. To earn money he worked construction on a hospital and waited tables at South of the Border, the roadside attraction near his hometown, returning there in summers through college.
He entered Harvard in 1971 and graduated summa cum laude in economics in 1975. He earned his PhD at the Massachusetts Institute of Technology in 1979, under the supervision of Stanley Fischer, later governor of the Bank of Israel; his readers included Robert Solow and Rüdiger Dornbusch. In 1978 he married Anna, a schoolteacher he had met on a blind date; they have two children, Joel and Alyssa. In Washington he became an ardent fan of the Nationals baseball team and a regular at their ballpark.
The scholar of the Great Depression
Bernanke taught at Stanford’s Graduate School of Business from 1979 to 1985 and then at Princeton, where he chaired the economics department from 1996 to 2002. He became one of the most published economists in the world, wrote two widely used textbooks, edited the American Economic Review and directed the monetary economics programme of the National Bureau of Economic Research. In Montgomery Township, New Jersey, he served two terms on the local school board.
His great subject was the Great Depression. Milton Friedman and Anna Schwartz had argued that the Federal Reserve turned a downturn into a catastrophe by letting the money supply collapse. In a celebrated 1983 paper, Bernanke added a further mechanism: the financial disruptions of 1930–33, above all the wave of bank failures, crippled the process by which credit was allocated; credit became costlier and scarcer even for sound households and businesses, depressing demand and deepening and prolonging the slump. This “credit channel” or financial accelerator explained how a mild recession could spiral into a depression. At a 2002 conference for Friedman’s ninetieth birthday, Bernanke, by then a Fed governor, apologised to Friedman and Schwartz on the institution’s behalf for its role in the Depression, and promised it would not happen again.
Into public service
In August 2002 Bernanke joined the Federal Reserve’s Board of Governors. In a 2002 speech on deflation he argued that a central bank with a printing press, or its electronic equivalent, could always prevent prices from falling, a remark, invoking Friedman’s image of a helicopter drop of money, that earned him the nickname “Helicopter Ben.” In 2004 he described what he called the Great Moderation, a long decline in the volatility of the business cycle. In June 2005 he became chairman of President George W. Bush’s Council of Economic Advisers, and that autumn Bush nominated him to succeed Alan Greenspan. He took office as chairman of the Federal Reserve on February 1, 2006.
In 2005 he had also coined the phrase “global saving glut” for his argument that a surplus of savings around the world was holding down interest rates and financing America’s current-account deficits. As chairman he wanted a more transparent Fed than Greenspan’s, but his first months brought a lesson in the power of words: after remarks he made privately at a Washington dinner were disclosed on CNBC by the journalist Maria Bartiromo, he called his comments a lapse in judgment.
The 2008 crisis
Within two years the scholar of the Depression faced the worst financial crisis since the 1930s. As the housing bust spread through the banking system, the Fed under Bernanke cut its benchmark interest rate from 5.25 per cent to effectively zero in less than a year, lent on an unprecedented scale to banks and other institutions, and helped arrange rescues, most controversially of the insurer AIG. Emails he sent during the crisis under the pseudonym “Edward Quince” later produced in a shareholder lawsuit over the AIG rescue, captured the stakes; in one he warned that a firm was days from failure while its executives thought the problem temporary, a disconnect he called dangerous. Testifying in that case in 2014, he said the Fed had very much not wanted to make the AIG loan. When rate cuts were no longer enough, it began quantitative easing, buying large quantities of mortgage-backed securities and long-term Treasury bonds to push down long-term interest rates.
Bernanke later wrote, in his 2015 memoir The Courage to Act, that the world economy came close to collapse in 2007–08 and that only the novel actions of the Fed, working with other U.S. and foreign authorities, prevented a catastrophe worse than the Great Depression. In 2009 Time named him Person of the Year, and President Barack Obama, renominating him, credited his background, temperament, courage and creativity with helping to prevent another depression.
Criticism and a second term
The response was fiercely contested. Critics attacked Bernanke for failing to foresee the crisis, for bailing out Wall Street and for printing money on a huge scale. Congress investigated allegations, raised by New York’s attorney general, that he and Treasury Secretary Henry Paulson pressured Bank of America to complete its takeover of Merrill Lynch without disclosing Merrill’s losses; Bernanke testified that he had done nothing illegal or improper and had not threatened to remove the bank’s management. Anna Schwartz herself urged Obama not to reappoint him. In January 2010 the Senate confirmed him for a second term by 70 to 30, at the time the narrowest margin for any Fed chairman.
In his second term Bernanke made the Fed more open than ever before, introducing regular press conferences after policy meetings, giving explicit forward guidance about future interest rates and adopting a formal two per cent inflation target. He stepped down on January 31, 2014, and was succeeded by Janet Yellen, the first woman to lead the Fed.
Nobel Prize and later work
After leaving the Fed, Bernanke became a distinguished fellow at the Brookings Institution and an adviser to the hedge fund Citadel and the bond manager PIMCO. In The Courage to Act he announced that he had left the Republican Party, describing himself as a moderate independent. He has since written, with Timothy Geithner and Henry Paulson, accounts of the crisis response, and in 2022 published 21st Century Monetary Policy.
In October 2022 he shared the Nobel Prize in Economic Sciences with Douglas Diamond and Philip Dybvig “for research on banks and financial crises.” The Royal Swedish Academy of Sciences highlighted his historical and statistical demonstration that failing banks played a decisive role in the depression of the 1930s, research that showed why preventing bank collapses matters, and that he had put into practice himself in 2008.
Legacy
Few economists have had the chance to test their own theories at the controls of the world’s most important central bank in a moment of genuine danger. Bernanke’s legacy remains debated: admirers credit him with preventing a second Great Depression, while critics argue that the Fed’s rescues rewarded the institutions that caused the crisis and that years of near-zero rates and asset purchases had costly side effects. What is not disputed is that the tools his Fed pioneered, emergency lending, quantitative easing and forward guidance, have become standard equipment for central banks around the world.
In his home state he is remembered with pride: South Carolina awarded him the Order of the Palmetto, and Exit 190 on Interstate 95 in Dillon County bears his name. The grandson of an immigrant from Galicia who learned Hebrew from a small-town cantor grew up to steer the world economy through its most dangerous days since the Depression he had studied.
Sources & further reading
Ben Bernanke, Wikipedia · Ben S. Bernanke, Facts, NobelPrize.org · Ben S. Bernanke, Federal Reserve History · Remarks by Governor Ben S. Bernanke, On Milton Friedman’s Ninetieth Birthday (2002) · Ben Bernanke, Jewish Virtual Library · Researched from the sources above and checked against them. Spotted an error? Tell us.
A life of tikkun olam. This is part of tikkun olam, the Jewish idea of repairing the world, and every one of us can add to it.