The Courage to Act: A Memoir of a Crisis and Its Aftermath by Bernanke Ben S

Author:Bernanke, Ben S. [Bernanke, Ben S.]
Language: eng
Format: epub, azw3
ISBN: 9780393247220
Publisher: W. W. Norton & Company
Published: 2015-10-04T21:00:00+00:00

WE HAD A PLAN; the next step was to sell it. At 3:30 p.m., Paulson, Cox, and I met again with the president in the Roosevelt Room at the White House, together with staff from the White House and other agencies. Kevin Warsh joined me. Once everyone was gathered, the president entered from the Oval Office and sat at his usual spot in the middle of one side of the long table. The participants had already found their places as indicated by printed name cards. I am pretty sure the president knew everyone and could have dispensed with the name cards, but protocol is powerful. As had become usual, Paulson, Cox, and I sat directly across from the president.

Hank and I updated him on market developments, including the runs on the money market funds. We emphasized the urgent need to control the crisis before the economy suffered more damage. At Hank’s request, I repeated my judgment that the Fed was nearing the end of its resources to stop the run on the financial system and that a comprehensive attack on the crisis using funds authorized by Congress was probably the only workable approach. We then reviewed the Treasury and Fed proposals to restore confidence in the money funds and Chris Cox’s proposed ban of short-selling. Finally, and most importantly, we turned to Hank’s proposal to ask Congress for money to buy bad assets.

For the second time in three days, we had come to President Bush to request his support for radical and unprecedented intervention in the American financial system. As a Republican with a strong predilection for letting the markets sort things out, the president couldn’t have been happy with the options we offered. He knew that it would be difficult to get his own party’s support. But, in the spirit of the approach that Franklin Roosevelt had taken three-quarters of a century earlier, he agreed that preserving the free market in the long run might require drastic government intervention in the short run. Once again, the president expressed his full support for us. We were grateful. Once again, Congress would be our next stop.

After I returned to my office, I called Speaker Pelosi and asked if Hank, Chris Cox, and I could meet with congressional leaders that evening. She said she would try to arrange it. At 6:00 p.m. Senator Obama called. I explained our strategy. He promised to be as supportive as possible. With the election little more than six weeks away, what happened in the financial markets and in the Congress could be important wild cards in what appeared to be a close contest. For the Fed, the situation was tricky: We needed to work closely with the administration and push for a legislative solution without appearing to be partisan.

Every Thursday afternoon the Fed reports on its balance sheet. Once a boring, under-the-radar release, it had become newsworthy for the information it provided on our lending. This Thursday, the report reflected deepening stress in the financial system.

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