You Should Read Ben Bernanke's Memoir -- And Not Just Because I'm In It

Commentary by Bob McTeer

Source: Forbes

Ben Bernanke’s memoir is out. It’s a very thick book. It’s a wonder it isn’t thicker since the FOMC’s voluminous verbatim transcripts are obviously its main source of detail about who said what when.

I wasn’t sure I would buy the book, but I looked in the index at the bookstore. Sure enough, there were two references to me. Sold!

I’m mentioned briefly on pages 62 and 73.

Mr. Bernanke’s first FOMC meeting was on August 13, 2002, as a newly appointed Governor in the Greenspan Fed. We were in the midst of a tepid recovery (sound familiar?) from a March to November 2001 recession. During 2001, the FOMC had cut the federal funds rate from 6.5% to 1.75%, an aggressive reaction. The recovery, such as it was, was a jobless recovery. Nevertheless, Chairman Greenspan recommended no change at the August meeting, which was agreed to by the FOMC unanimously.

The economy had shown few signs of life by the time Mr. Bernanke’s second FOMC meeting rolled around in September 2002. But the federal funds rate was already at a low 1.75% and the committee discussed the potential problems of a zero bound situation if the federal funds rate approached zero. Chairman Greenspan again recommended no change, although he hedged by saying we might have to act before the next scheduled meeting.

Mr. Bernanke said on page 62 of his book, “I went along even though I had been leaning toward a rate cut.” When the vote came Governor Ned Gramlich and I dissented, arguing that we should move then. In recounting this, Mr. Bernanke said “The other dissenter was Bob McTeer of the Federal Reserve Bank of Dallas, who had earlier earned the nickname ‘The Lonesome Dove.’” More about the Lonesome Dove moniker at another time.

By the next meeting, the full FOMC adopted the Gramlich/McTeer position and cut rates. For the record, I had no idea that Governor Gramlich planned to dissent. Dissents are rarer for Fed Governors than for Fed Presidents; so, I was honored that he asked me to write the single paragraph for the minutes explaining our position.

The jobless recovery remained jobless into 2003 just ahead of the March 2003 FOMC meeting, the Labor Department reported a decline of 308,000 jobs in February alone. “‘With recoveries like this, who needs recessions!’ said Dallas Fed president Bob McTeer.” That was my page 73 reference. Two sentences in a 610 page book!

While I read the early portions of the Bernanke book for nostalgia, most people will focus on his recounting of what he and others did during the financial crisis and its aftermath and what they were thinking at the time. It is worth your time.