Ben Bernanke can look back with pride

WHEN Ben Bernanke ends his two terms as chairman of the US Federal Reserve at the end of January 2014, he can look back with pride and satisfaction at his record over the past eight years. Although this record is not without blemish, Mr Bernanke has, in particular, one towering achievement to his credit and for which he will be long remembered: he has successfully steered US monetary policy through arguably the most dangerous period since the Great Depression of the 1930s.

When he took over as Fed chairman in February 2006, the US economy was strong and its real estate and stock markets were roaring. Mr Bernanke initially underestimated the dangers that lay ahead. For instance, in March 2007 - just months before the global financial crisis erupted - he was telling the Joint Economic Committee of the US Congress that the economic impact of the problems in the subprime mortgage market (which were already visible) "seems likely to be contained".

Although he did not act in time to prevent the crisis, once it broke out, he dealt with it with courage and skill. He was willing to be aggressive and unconventional, which is what the situation demanded. He unleashed three rounds of quantitative easing (QE) in succession, and pushed the Fed Funds rate down from 5.25 per cent in June 2006 to 0-0.25 per cent by December 2008. During the worst of the crisis, he provided special emergency loans to US financial institutions, many of which would probably have gone bankrupt without them. In the process, he permitted the Fed's balance sheet to swell to record levels.