Re-Appointed Fed Chief Ben Bernanke Didn't Get Us Out of the Economic Crisis, He Helped Cause It

The NewsHour With Jim Lehrer can be thought of as the Potemkin village of American democracy. Every evening, it presents a prettified version of political debate -- ever so civil and high-minded -- that thoroughly blots out the substance of dissenting critics or the untamed opinions of mere citizens. PBS's sanitized version of news was deployed this summer to assist the charm offensive launched by the Federal Reserve and its embattled chairman, Ben Bernanke. The NewsHour staged a "town meeting" in Kansas City at which Bernanke fielded prescreened questions from preselected citizens. As town meetings go, this was strictly polite. As TV goes, it was deadly dull. The citizens were so deferential they seemed sedated. Jim Lehrer was so laconic, several times I thought he had nodded off.

The message, however, was reassuring. With folksy talk, Bernanke came across as a mild-mannered professor earnestly coping with financial complexities and sleepless nights. Gentle Ben struggles to save us from another Great Depression. People are angry at the Fed (and the elected government) for devoting so many trillions to bail out failing bankers while the populace copes with the disastrous results of the bankers' folly. Bernanke said he too hated the bailouts but had no choice. "I am as disgusted as you are," Gentle Ben allowed. To show further he is a good guy, Bernanke appointed a labor leader, Denis Hughes, as chairman of the board at the New York Federal Reserve Bank (the operating president, however, is a Goldman Sachs guy).

Bernanke's down-home touch had instant appeal among the elite media. The theme was swiftly amplified by the Washington Post, New York Times and Wall Street Journal. As it happens, David Wessel, the Journal's economics editor, has just published a new book -- In Fed We Trust -- that describes the Fed chairman's struggle against the darkness in blow-by-blow detail. New York Times columnist David Brooks summarized the tale as "effective muddling through." Yes, mistakes were made, Brooks conceded, "but they did avert disaster and committed only a few big blunders. In the real world, that counts as a job well done."

In the real world beyond Brooks's grasp, this "job well done" counts as cruel joke on the hapless victims. The Federal Reserve did not "avert disaster" for many millions of Americans. It helped to cause their disaster. The central bank, as I have written, was co-author of the destruction, along with the reckless financiers of Wall Street. Now we are told to feel good about its heroic efforts to clean up their mess.

The personalized narrative is the standard approach the establishment uses to disarm substantive critics and divert public opinion. Create a fictionalized drama about the wise leaders who manage "to do the right thing" in the face of horrendous adversity and wrongheaded political opposition. Remember Alan Greenspan celebrated as the Maestro. Or Time's "Committee to Save the World" cover after the 1998 Asian financial crisis -- picturing Robert Rubin, Alan Greenspan and Larry Summers as our saviors. Now it is Gentle Ben to the rescue.

The tradition of dramatizing financial titans as public heroes probably started 100 years ago when J.P. Morgan was acclaimed for saving the national economy after the Panic of 1907. That comforting story is still told by adoring pundits who lionize the famous banker as a symbol of market ideology. Only they have the story backwards. The true history is that the federal government -- Washington, not Wall Street -- came to the rescue of banking in 1907. It was the first bailout for Wall Street. The rescue convinced bankers they needed the Federal Reserve to do more of the same and it has.