He came, touted his blog, and riffed on the intricacies of negative interest rates.
The Wharton School on Wednesday evening hosted former Federal Reserve Chairman Ben Bernanke, who sat for an hour-long Q&A with finance professor Jeremy Siegel before a packed house at the Annenberg Center.
Bernanke was promoting his new book, The Courage to Act (W.W. Norton, 2015). While his remarks were off the record, on Thursday, Siegel gave a brief overview of key points covered during the talk, attended by Wharton VIPs and hundreds of students.
Because of space, many were turned away from the event, titled "Contemporary Economic Issues: Economic Crisis & Rebuilding the American Economy" and sponsored by the Penn Wharton Public Policy Initiative. Among the highlights were:
Bernanke blogs. He consults for hedge funds, but his main public platform these days is his blog for the Washington think tank the Brookings Institution (http://www.brookings.edu/blogs/ben-bernanke). "Check out my blog!" he told the audience, smiling.
The inevitability of Lehman Bros.' failure in 2008. "Even if it had somehow been possible for the Fed on its own to save Lehman, and then perhaps even AIG, we would not have had either the capacity or the political support to undertake any future financial rescues. . . . Congress would never have acted absent the failure of some large firm and the associated damage to the system. In that sense, a Lehman-type episode was probably inevitable."
Republicans had been unequivocal about no bailouts. "Our challenge that weekend went beyond finding a solution for Lehman. We would have to do so in the face of bitter criticism." (Siegel showed slides of the quotes directly from Bernanke's book.)
"I'm surprised when people ask if there's anything really strong in the book. I don't think a lot of people have read it," Siegel noted Thursday.
"After the event last night, I asked him, 'Did I give you a hard time?' and he said, 'Oh, no, I've had much rougher treatment.' "
"Bernanke threaded the needle, in the sense that he almost had to let a firm fail to show what chaos was to come," Siegel said. "And even then, it was so hard. Congress was dragging its feet. They talked about TARP [the Troubled Asset Relief Program] and then vetoed it, and the stock market dropped 750 points. Only then did they pass the rescue packages."
On the possibility of negative interest rates. "He's talked about this topic before. I don't think he ever wanted to go negative. In subsequent interviews, he's been asked that question. Everyone is asking about negative rates. I think the response that he gave us was that the Fed discussed it and said it wouldn't work," Siegel said.
Siegel's personal opinion? "We're not going in the direction of negative rates. That said, negative rates are a valid policy tool. A lot of people think it's negative and counterproductive. I do think it is a valid policy if we have to get there. But we're nowhere near that in the United States. Right now, it's only a question of when we raise next. We pay 0.50 percent right now on reserves, the highest rate in the world. We're not going down to negative."
Bernanke also had harsh words for the Republicans. "I never left the Republican Party. I felt that the party left me," he writes in The Courage to Act.
Bernanke served as Fed chairman from 2006 to 2014, named to the post by President George W. Bush and then reappointed by President Obama.