Don't expect Ben Bernanke to have a lot of nice things to say about Wall Street bankers in his upcoming memoir, which comes out this week. In a wide ranging interview with USA Today, the former chairman of the Federal Reserve says more of the bankers and corporate executives who helped cause the financial crisis should be in jail.
He says the Department of Justice focused too much, in the wake of the meltdown, on sanctioning financial firms, and getting large fines. He said there wasn't enough effort put into punishing individuals.
"It would have been my preference to have more investigation of individual action, since obviously everything what went wrong or was illegal was done by some individual, not by an abstract firm," Bernanke told USA Today.
There has been a vigorous debate since the financial crisis whether what lead to economic meltdown was wrongdoing or just general stupidity. So it is interesting that someone so close to the action would go with the former. At one point in the interview, which the USA Today has posted online, Susan Page asks Bernanke if more bankers should have gone to jail.
"Yeah, I think so," Bernanke replies. But Bernanke says the Fed didn't have the power to jail anyone. That's why he says the fault lies with the Justice Department. But that's not really fair. Bernanke could have had his regulators focus more on the misdeeds of individuals, and then used that evidence to pressure the DoJ to act. But there is no indication the Fed did that under Bernanke.
Bernanke spends much of the interview, as he has done in the past, defending the extraordinary actions of the Fed in the wake of the financial crisis, and the bailout in general. Bernanke says that "there was a reasonably good chance that, barring stabilization of the financial system, that we could have gone into a 1930s-style depression." Moreover, he says that the worst part of the crisis was so-called "Leman Weekend," the weekend that the federal government allowed investment bank Lehman Brothers to fail. "We were very, very determined not to let it collapse," he tells Page. "But we were out of bullets at that point."
The memoir, The Courage to Act: A Memoir of a Crisis and its Aftermath, is due for publication on Tuesday by W.W. Norton & Co., and while it focuses mostly on the events of the financial crisis, it also includes personal anecdotes from before Bernanke's time at the Fed, dating as far back as his childhood in a small town in South Carolina.