Federal Reserve Chairman Ben Bernanke is back in the classroom this month to deliver a series of four lectures for undergraduate students at the George Washington School of Business in Washington, D.C. It’s a welcome reconnection with students for Chairman Bernanke, who joined the Federal Reserve System in 2002 after a long career as an economics professor at Stanford University and later at Princeton University. The lectures at the George Washington School are part of Bernanke’s ongoing effort to educate the public about the role played by the Federal Reserve during the recent financial crisis. The nature and the scope of these lectures allow the Chairman to draw upon his background as a scholar of the Great Depression and his experience at the helm of the U.S. central bank to put the financial crisis in a broader context. The Chairman will talk about the origins and mission of central banks, identify the lessons learned from previous financial crises, and describe how those lessons informed the Fed’s decisions during the recent crisis.
In this week’s lectures, delivered on March 20 and 22, the Chairman presented a historical perspective on central banking and the role of the Federal Reserve. In the first lecture, the Chairman explained the central bank’s dual mission of promoting macroeconomic and financial stability and reviewed the financial panics of the late nineteenth and early twentieth centuries that led to the creation of central banking in the United States. He then discussed the Federal Reserve’s first experience in dealing with a severe economic and financial crisis—the Great Depression—and concluded by highlighting the lessons learned from that experience.
In the second lecture, the Chairman reviewed developments in the practice of central banking after World War II, including the conquest of inflation and the achievement of economic stability during the so-called Great Moderation. He then turned his discussion to the triggers of the recent financial crisis: the dramatic rise and subsequent fall of house prices, and the associated wave of mortgage losses. Finally, the Chairman examined the vulnerabilities in the economic and financial system that transformed the housing bust into a full-blown financial crisis—a prelude to next week’s discussion of the Fed’s response to the crisis.
The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.