By Michael Shulman
ROCKVILLE, Md. (MarketWatch) — The Federal Reserve’s quantitative-easing program has been bashed by opponents who are portraying Fed Chairman Ben Bernanke as public enemy No. 1.
Bernanke is keenly aware of this and recently appeared on “60 Minutes” to defend the controversial QE2, which involves the purchase of $600 billion in bonds.
Opponents have widely criticized the program as simply printing money out of thin air. Bernanke claims the policy will not lead to inflation and said he isn’t ruling out more quantitative easing. That has some politicians and armchair economists painting him as one of the biggest villains of the recent downturn. Read about the top 10 Wall Street villains of 2010 on InvestorPlace.
Bernanke has been vilified by critics, but not by me. I love him, and here are five reasons why:
Bernanke let Lehman Brothers fail. With the U.S. financial system on the brink of collapse, not every incompetent institution could be saved, and I think if you had to pick a bank to fail, it should be the one run by Dick Fuld. Yes, the refusal to bail out Lehman caused the market to crash, but that was going to happen anyway.
Federal Reserve Chairman Ben Bernanke.
By letting Lehman fail, Bernanke was essentially saying the following:
To the nation: “We live in a capitalist country.”
To the other banks: “Get your act together.”
To Congress: “We need money to save the banking system, and we need it now.”
For a great read on this topic, check out David Wessel’s “In Fed We Trust.”
The fall of Lehman led to Congress passing the Troubled Asset Relief Program. Under TARP, the U.S. Treasury was allotted $700 billion to buy mortgage-backed securities from institutions in an effort to create liquidity and un-seize the money markets.
TARP — created by Bernanke, former Treasury Secretary Hank Paulson and current Treasury Secretary Timothy Geithner, who at the time was president of the Federal Reserve Bank of New York — saved us.
Despite its many critics, TARP was absolutely necessary to keep the U.S. financial system from collapsing and to keep the country from succumbing to another Great Depression, the repercussions of which would have rippled through the rest of the already teetering global financial system. Read about the top five small-cap stocks for December on InvestorPlace.
Five reasons to love Bernanke