The Alchemists: Three Central Bankers and a World on Fire (55 page)

B
ernanke led the Federal Open Market Committee, which sets monetary policy for the United States, through a controversial decision to cut interest rates and push money into the flailing U.S. economy through “quantitative easing,” or buying bonds using newly created money.

T
he series of financial bailouts during the crisis exposed Bernanke and the Fed to vociferous criticism from the left and right, and the Fed’s long-standing powers and independence came into doubt in Congress in its aftermath. Shown here are Bernanke
(seate
d
)
and Treasury Secretary Tim Geithner
(standin
g
)
at a House Financial Services hearing in 2009 about the AIG bailout.

B
ernanke
(lef
t
)
, Fed governor Kevin Warsh
(center)
, and vice chairman Don Kohn
(right)
—here at a coffee break from the annual Kansas City Fed economic symposium in Jackson Hole—formed the inner circle in a series of extraordinary interventions to try to keep the global financial system from coming unglued in 2008.

D
espite criticism from all sides during the bailouts, the Fed kept its powers to regulate banks and the independence to set monetary policy. It had support from President Obama, who was in turn influenced by his treasury secretary and former New York Fed president Timothy Geithner, and crucial help from banking lobbyists and presidents of regional Fed banks across the United States, including Tom Hoenig of the Kansas City Fed, pictured here.

B
ernanke’s stewardship of the economy and crisis management was enough for Obama to nominate him to a second four-year term in 2009—though the Senate confirmation was a closer call than anyone had expected.

O
ver the course of the crisis, Bernanke and Mervyn King shared a particular bond—a background as academic economists—and had even shared an office suite as young faculty at MIT. King created the modern Bank of England, first as its chief economist in the 1990s and as governor starting in 2003.

K
ing
(right)
sometimes clashed with Alistair Darling
(lef
t
)
, the chancellor of the exchequer until 2010. They are pictured here in Porto, Portugal, at an international summit on September 14, 2007, the day Britain experienced its first bank run since Overend, Gurney—this time on Northern Rock.

D
arling wrote that he was blindsided by King’s comments at the 2009 Mansion House dinner, arguing for the Bank of England to be given greater authority over the banking system. But by the 2010 dinner, pictured here, King was on better terms with the new chancellor, George Osborne
(seate
d
)
.

L
eading central bankers and finance ministers traveled to Iqaluit, Canada, in February 2010 for a G-7 summit. In the Arctic, they developed consensus that after extensive intervention to support economic growth, including fiscal and monetary stimulus, it was time to begin planning an exit. As it would turn out, some of the greatest challenges were yet to come, and the turn to austerity was premature.

M
ervyn King took advantage of the demonstration of dog sledding, though the banker’s interest in native culture went just so far; only the Canadian officials partook of raw seal meat in Iqaluit.

J
ean-Claude Trichet, shown here at the Jackson Hole conference, had made a career helping build a unified Europe through a common currency. The veteran French civil servant was the second president of the ECB, the most vivid testament to European unity, starting in 2003. But by 2010, the economic fallout from the 2008 crisis had left the finances of Greece, and soon other European nations, in such precarious straits as to risk an unraveling of the union.