The first time 60 Minutes correspondent Scott Pelley asked for an interview with Ben Bernanke, he got laughed at. Fed chairmen don't do TV interviews. But then, they didn't used to do hundred-billion-dollar bailouts of ruined financial institutions, either.
So there was Mr. Bernanke on Sunday night, sauntering down Main Street in his hometown of Dillon, S.C., with the cameras rolling. See that place? It's where Mr. Bernanke's grandfather opened a drugstore in the 1940s. And that one? That's the modest ranch house he grew up in. And over there? It's the restaurant where he once wore a poncho while serving bean burritos to tourists.
So as you can tell, the man trying to save the U.S. economy is just an ordinary small-town guy, albeit one who taught himself calculus and scored 1590 (out of a possible 1600) on the college admissions test. There. Feel better?
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No? Then how about this: Ben Bernanke is as mad as everyone else about Wall Street, especially the elephantine rescue of American International Group. "It makes me angry. I slammed the phone more than a few times on discussing AIG," he said, not totally convincingly. One suspects that Mr. Bernanke is losing the phone-slamming competition to angrier people in Washington, like the new president, who roasted AIG for giving $165-million (U.S.) in bonuses to employees in the group that destroyed it with bad credit bets. "I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?" Barack Obama said. "This isn't just a matter of dollars and cents."
No, it's not at all about dollars and cents. The whole public relations offensive of the past few days - Mr. Bernanke on CBS without a tie; President Barack Obama showing his fury; Treasury Secretary Tim Geithner badgering the banks to lend more to business, not unlike a certain Canadian finance minister - is about something else. It's about myth making in a recession.
Myth No. 1: The chairman of the Fed can see what's coming in the economy. The 60 Minutes story was masterful because it made Mr. Bernanke look whip-smart but not a snob. ("I come from Main Street. That's my background. I've never been on Wall Street.") That gave more credibility to his predictions - a possible end to the recession this year, "a strong and sustained" recovery.
He may turn out to be right. Or not. But the real purpose is to convince Americans he's right so they'll have the confidence to buy cars or houses. Those who still believe in an omniscient Fed might want to refer to Mr. Bernanke's forecast last April, when he said a recession was "possible" but that the economy should rebound by the second half ... of 2008.
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Myth No. 2: This recession was caused by the greed of Wall Street. Therefore, whacking Wall Street will cure it. Yes, it's preposterous to give $165-million to a few hundred people who, in effect, killed what was once a great company. But guess what? That's about 0.1 per cent of the cost of the AIG bailout so far. And the bonuses were negotiated by the previous, incompetent management. Restricting the pay of top bankers at $500,000, as the Obama administration has done for U.S. banks receiving taxpayer assistance, also satisfies the very powerful human need for vengeance. But it accomplishes nothing else. It doesn't help anyone pay his mortgage.
The truth is that Wall Street and Main Street, to use Mr. Bernanke's terms, are partners in the debacle. (And the Fed, under Alan Greenspan, had a big role - though Mr. Bernanke didn't mention his discredited predecessor's name once on 60 Minutes. Funny.) U.S. households ran up debt at an unprecedented rate between 2001 and 2008, and the delinquency rate on all mortgages - not just subprime - began to rise many months before the jobless rate spiked. Do people who bought unaffordable homes in suburban San Francisco bear no responsibility for their actions?
Myth No. 3: Banks will lend more if only politicians nag them to. Mr. Bernanke summed up the schizophrenia of governments everywhere when he advised bankers watching the interview to "get their banks back on the path of making good loans, safe loans, and to have a reasonable sense of humility." Then Mr. Geithner announced that banks on the public dole would have to report monthly how much they're lending to small business. He encouraged the bankers "to go the extra mile" for those customers. But what if the only "safe" thing to do is to lend less? No banker I know is holding back loans just for the sake of it. (On the contrary, they want to do the business because they can earn better spreads and there's less competition.)
You can understand why the Obama-ites tell these myths. The number of long-term unemployed in the U.S. (those who've been without a job for more than six months) is now almost three million. The American psyche is battered. So there's no harm in pinning blame on faceless AIG derivatives traders and tightwad bankers, and spreading the fiction that a humble immigrant's grandson from South Carolina can save them. Sometimes, people just need to be lied to.
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