Federal Reserve chairmen do not do interviews.
But Ben Bernanke broke with tradition and did a long interview with CBS reporter Scott Pelley for “60 Minutes” last night. (Click here to watch the first part of the interview)
His message: If the federal government hadn’t bailed out the nation’s banks, and insurance giant AIG, we’d have fallen into a second Great Depression.
“I thought we were pretty close to a global financial meltdown” last fall, Bernanke says.
“How much danger was there?” Pelley asks. “How close a call?”
“It was very close. It was very close,” Bernanke replies “The Congress passed the bill that gave Treasury the right to put capital into the banks the first week in October. And it was in the second week in October that the crisis reached its peak. If we’d not had those powers we could have had a much, much worse outcome. So it was a very dangerous situation.”
For an understated academic like Bernanke, that’s the equivalent of setting his hair on fire.
He says the Fed made two big mistakes that helped to turn the recession of 1929 into the depression of the 1930s, and one of those mistakes was standing by and allowing bank after bank to fail.
The world wide panic that followed Lehman Brothers failure in September “proved that you cannot let a large internationally active firm fail in the middle of a financial crisis.”
While he doesn’t think the financial system is back to normal, Bernanke says it’s recovering, that the recession will end sometime this year and a recovery will begin in 2010.
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