My new column is in the issue of Time with Mother Theresa on the cover and online here. It begins:
Much of what Ben Bernanke spends his days doing oscillates between the incomprehensibly arcane and the unspeakably dull. Lately, though, the Federal Reserve chairman has a stark, even exciting task at hand. He’s been imitating Jimmy Stewart in It’s a Wonderful Life and trying to halt a bank run.
While Stewart’s George Bailey had to make do with his powers of persuasion and his honeymoon fund to save the Bailey Building and Loan, Bernanke has the full faith and credit of the U.S. government behind him. The Fed can effectively print U.S. dollars at will. It can even, as Bernanke famously suggested in 2002, drop them out of helicopters, if that’s what it takes.
Unlike Bailey, though, Bernanke doesn’t know all his customers or even his loan officers. He cannot reassure nervous depositors (a.k.a. lenders) by telling them exactly where their money is invested, because he has no clear idea himself. He probably suspects that many borrowers and lenders have been up to no good and richly deserve the bad things that are happening to them. And while he can manufacture cash, he knows that if he overdoes it, hyperinflation and a dollar crash could result.
So Bernanke walks a thin line. Too far in one direction, and he bails out all the irresponsible people and institutions that have gotten us into the subprime mess and subsequent debt-market crunch. Too far in the other, and the global financial system collapses on his watch. Read more.
My editor, Bill Saporito, thought the It’s a Wonderful Life reference was pretty old hat and wanted me to try starting the piece with a colorful account from the Panic of 1907, which comes up later in the column. It was late Tuesday, I was very tired, and the thing had to go to the printer that night. Plus I thought the Wonderful Life parallel nicely set up the quandary faced by Bernanke: He has a lot more wealth at his disposal than George Bailey, but a lot less information. So I left things the way they were. Let me know if you think I made a terrible mistake. And I hope to write a post soon about the Panic of 1907, and the entertaining new book about it that I cite in the column.
I personally sorta like the way Bernanke is handling things. But then what would I know; I’m no Jim Cramer.