Americans have been speculating about the Federal Reserve’s monetary policy choices – raising rates, lowering rates, buying bonds, tapering bond buying, and so on – for a long time. Sometimes, they even second-guess themselves.
Paul Volcker (1979-1987) took over an economic quagmire known as The Great Inflation. When he took office, U.S. inflation was in the double digits, and the unemployment rate was 6 percent. Volcker raised the Fed funds rate from 11 percent in August 1979 to 20 percent in March 1980, reported Kimberly Amadeo of The Balance.
“Farmers protested at the Federal Reserve’s headquarters, and car dealers, who were especially affected by high interest rates, sent coffins containing the car keys of unsold vehicles. Many people also wrote letters to Volcker telling him how they had saved for many years to purchase a home but were now unable to because of high rates,” reported Bill Medley of the Federal Reserve Bank of Kansas City.
Alan Greenspan (1987-2006) was in charge through two U.S. recessions, the Asian financial crisis, and the September 11 terrorist attacks.Regardless, he oversaw the country’s longest peacetime expansion. Time Magazine’s ‘25 people to Blame for the Financial Crisis,’ reported:
“…the super-low interest rates Greenspan brought in the early 2000s and his long-standing disdain for regulation are now held up as leading causes of the mortgage crisis. The maestro admitted in an October congressional hearing that he had ‘made a mistake in presuming’ that financial firms could regulate themselves.”
Ben Bernanke (2006-2014) became Fed Chair just before the financial crisis of 2006-2010. He was at the helm as the Fed began to stimulate economic growth through quantitative easing (buying mortgage-backed securities and long-term treasuries).
In 2012, economist Paul Krugman wrote in the New York Times, “…while the Fed went to great lengths to rescue the financial system, it has done far less to rescue workers. The U.S. economy remains deeply depressed, with long-term unemployment in particular still disastrously high, a point Bernanke himself has recently emphasized. Yet the Fed isn’t taking strong action to rectify the situation.”
It’s awfully hard to evaluate the achievements and/or failures of a Fed Chair before the economic dust settles. Usually, that’s long after they’ve left office.
