Opinion
John Rung President and Publisher
Dan McCaleb Group Editor
Jason Schaumburg Editor
Thursday, December 26, 2013 • Page A13 • Northwest Herald • NWHerald.com 8SKETCH VIEW
8ANOTHER VIEW
Bernanke Doctrine will guide Fed for years In a speech last week to celebrate the Federal Reserve’s 100th birthday, Chairman Ben Bernanke said one of the central bank’s greatest strengths is its willingness, “during its finest hours,” to stand up to political pressure and make tough decisions. To remind him that those pressures aren’t new, Bernanke keeps in his office one of many two-by-fours that construction industry workers mailed to Paul Volcker to protest the former Fed chairman’s double-digit interest rates. To tame runaway inflation, Volcker had to crush the construction business. That culture of political independence freed Bernanke to break the central-bank mold just as Volcker had done. He established what might be called the Bernanke Doctrine, a two-part philosophy. First, use the Fed’s balance sheet to do whatever it takes to stimulate a faltering economy. With this new tool of monetary policy, he maneuvered the U.S. away from another Great Depression. Second, put financial stability alongside the Fed’s existing mandates of price stability and full employment. Along the way, he spurned the free-market, deregulatory thinking of his predecessor, Alan Greenspan, and startled his Republican political sponsors. Yet he earned the admiration of colleagues and central bankers worldwide, many of whom now are copying his moves. Underwater homeowners, underemployed workers and underpaid savers might not see Bernanke as a heroic figure. History most likely will. Bernanke didn’t arrive at the Fed in 2006 intent on revolutionizing central banking. Just the opposite: The economy seemed strong, with unemployment at 5 percent and annual growth of 3.3 percent. The housing bubble, however, was inflating rapidly. The smartest economists, Bernanke included, failed to see that the combination of undercapitalized financial institutions, subprime loans, securitizations and exotic derivatives could produce the lethal mix that crashed the global economy. Bernanke’s Fed was responsible for regulating large banks and home loans, and it failed. What happened next redeems him. Bernanke recognized that an economy running on credit would succumb unless the Fed fixed broken credit markets, revived consumer demand and avoided deflation. Using his deep knowledge of the mistakes of the 1930s, Bernanke set up one lending facility after another to finance everything from commercial paper to auto loans. He helped persuade Congress to adopt the Troubled Asset Relief Program to bail out hundreds of banks. He made sure dollar loans were available to overseas banks. He brought interest rates down to near zero, and promised to hold them there indefinitely. To make that commitment more credible, he put more of the Fed’s deliberations on the record. Granted, mistakes were made. Letting Lehman Brothers Holdings Inc. fail was a big one. Bernanke and Treasury Secretary Hank Paulson wanted to make an example of Lehman and end the moral hazard that bailouts cause. That turned a liquidity crisis into a full-blown panic. By the end of 2009, the emergency had abated, but the economy was still sick. So Bernanke’s Fed got even more creative. With inflation hawks – Republican lawmakers, conservative economists and even some of his Fed colleagues – screaming bloody murder, he started the first of three phases of quantitative easing. The Fed bought enormous quantities of Treasury bonds and mortgage-backed securities to depress long- term interest rates and induce investors to shift into other assets. The Fed’s balance sheet grew from $1 trillion in 2008 to almost $4 trillion, where it stands today – greater than Germany’s gross domestic product. Bernanke announced that the pace of QE would be slowed – though modestly, from $85 billion a month to $75 billion a month, with further “measured steps” to follow if the recovery continues as the Fed expects. He stressed that while the Fed still is adding to its balance sheet, it isn’t tightening monetary conditions: It’s still adding stimulus, but from now on at a gradually diminishing rate. The policy worked. It energized the stock market, lowered long-term interest rates, supported the interest-rate-sensitive housing and auto markets, and cut unemployment – not a lot, but enough to quiet many critics, especially once they saw that inflation remained tame. Under Janet Yellen, the next Fed chief, the Bernanke Doctrine is certain to prevail. The central bank will take its mandate to reach full employment as seriously as the order to keep inflation in check. Bernanke, scholar of the Great Depression, would not have wished that expertise to be called upon. But it was, and the U.S. can consider itself fortunate he was there. Bloomberg News
Editorial Board: John Rung, Don Bricker, Dan McCaleb, Jason Schaumburg, Kevin Lyons, Jon Styf, Kate Schott, Stacia Hahn
8IT’S YOUR WRITE PADS recognition To the Editor: Thank you for your recent article educating the public on PADS (Public Action to Deliver Shelter). Your article did not distinguish between the PADS facility on Kishwaukee Valley Road in Woodstock and the 10 church emergency shelters. The PADS facility is staffed by professionals who operate a transitional living facility, as well as various programs to assist homeless persons with job search, training, counseling and other matters. Distinct from that facility are the 10 emergency shelters operating yearly from October to April in McHenry County churches. These sites, with some towns needing two sites to safely house their guests, open their doors one night each week. They serve 40 to 70 people, depending upon weather and other variables. The church sites are funded entirely by private donations and staffed entirely by volunteers. The Woodstock site at Redeemer Lutheran Church receives support
from over 10 religious and civic organizations that space does not allow us to thank here. Additionally, we have individuals, along with student groups from Woodstock and Marian Central high schools, who step forward to provide meals and lunches throughout the season. In short, the Woodstock emergency homeless shelter on Wednesday evenings, along with the other church shelters, are perfect examples of people coming together to help their own community, without need for government assistance. Without the generosity and hard work of the participating religious groups, civic organizations, and concerned individuals, these shelters of last resort could not operate. Pastor Tom Rogers and Martin J. Coonen Woodstock
Cellphone ban ‘stupid’ To the Editor: Former Cook County assistant state’s attorney Mr. Mulroe has pushed through and succeeded
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with a ban on hand-held cellphones after Jan. 1. Our society has become infatuated with protecting the stupid from themselves. What’s next, drinking coffee, eating, twirling your hair, banning drive-through windows at fast-food places because they contribute to eating while driving? To quote the comedian Ron White, “You can’t fix stupid.” Stupid people will do stupid things in cars no matter what laws we come up with. I can think of 10 things that are more hazardous during driving than being on a cellphone. Don’t get distracted while changing the radio station or that will be next.
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The ban on texting has done very little to change anything. How many times have you been next to a car and the driver is looking down at his phone texting? All that law did was take the person’s eyes off the road even more than before because they’re trying to hide their phone. People die in cars, and there is nothing we can do about it. Banning cars is the only way, and we don’t want to put that idea out there for the bleeding hearts that want to save people from themselves. John Callanan Spring Grove
Living with a veterinarian and loving it LOMBARD – “We’re all hoarders, you know,” my wife Joan explained to me after attending the Illinois State Veterinary Medical Association’s annual meeting. The vets were practicing doing ultrasounds on dogs from the local animal shelter, and the doctors were quickly falling in love with the homeless canines. I’m sure I wasn’t the only veterinary spouse to hear: “Can we adopt one?” Animal doctors have such an intense love for creatures that their homes tend to become, well, menageries. You see, I’ve been blessed with two veterinarians in my life – my father and my wife. Vets have an affinity for animals that most people don’t understand. When I asked my wife for her hand in marriage, I made her promise: no animals would be added to our family – unless we both agreed. I asked for the promise with a childhood memory in the back of my mind. When I was 8, my dad came home with a billy goat. Dad was vaccinating cattle at a sale barn
VIEWS Scott Reeder and as a joke bid $5 on a lonely billy goat that didn’t have any ears. We ended up owning the beast that devoured newspapers, cigarette butts and just about anything else. The ruminant had no respect for fences or screen doors. No sooner had the goat been put in the pasture than it jumped the fence, ran across our yard, peered through the screen door and baaed loudly. My mother took to chasing Billy off the porch with a broom – until he ate the broom. Having no respect for fences, the animal took to sunning itself on the front porch, where more than a few drivers nearly swerved off the road after observing the goat. Given this history, you’d think I’d have gone into marriage to a vet with my eyes wide open. Dream on. My wife brought a cat into
8THE FIRST AMENDMENT
the marriage that hated all men. Within a week, the cat marked my suit and every freshly pressed white shirt of mine hanging in the closet. But marital adventures in felines didn’t end there. A couple of years after we wed, my wife was more than eight months pregnant with our first daughter, and she came home with a kitten that was born without eyes. Between sobs, Joan said, “They wanted me to put it to sleep just because it was born this way. I couldn’t do it, Scott. What happens if our child is born without any eyes?” As my pregnant wife stroked the blind kitten she added, “It’s just a foster cat. It will stay with us just until we find someone who will give it a home permanently.” The foster cat is still with us eight years later. It has the floor plan of the house memorized, avoids the kids’ toys on the floor with an eerie sixth sense and lounges on the window sill like a prince on a throne. There have been other creatures.
There is the rabbit that suddenly appeared in our home after my wife discovered it needed a home. Our three daughters play with it along with their Barbies, My Little Ponies and costume jewelry. In addition to four dogs, two cats, two parakeets and a rabbit, there are other creatures in our family: namely three goats. Several nights a week, my two older daughters and I find ourselves scratching behind the ears of Blackie, Snowflake and Alfred. They like to nibble on carrots and apples. Goat slobber sticks to our fingers, and my girls giggle as they receive gentle butts from the top of their heads. The time with these creatures brings us closer together. It’s the legacy of the vets in our lives: loving animals and loving one another.
• Scott Reeder is a veteran statehouse reporter and the journalist in residence at the Illinois Policy Institute. He can be reached at sreeder@illinoispolicy.org.
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