Forceful action by policymakers in the United States and abroad during the financial crisis allowed the global economy to dodge a second Great Depression, Federal Reserve Chairman Ben Bernanke said Thursday.
Bernanke, a scholar of the Great Depression, said policymakers learned from the mistakes of their predecessors in the 1930s and used those lessons to fight the crisis that struck with force in 2008.
"Although the economic consequences of the financial crisis have been painfully severe, the world was spared an even worse cataclysm that could have rivaled or surpassed the Great Depression," the Fed chief said in remarks prepared for a speech to the Center for the Study of the Presidency and Congress.
At the start of the Great Depression, the Fed and the administration of President Herbert Hoover erred by failing to act aggressively to address problems, including weeding out weak banks. And the Fed ended up tightening credit too soon.
Bernanke rolled out bold and unprecedented programs to help ease credit clogs and spur lending. He coordinated emergency relief actions with central banks overseas. He slashed a key lending rate to a record low near zero, where it remains.
The Fed chairman has won praise from some on Capitol Hill for his handling of the crisis. But he has been criticized by lawmakers and others for failing to detect problems leading up to the crisis.
Bernanke cited four lessons learned from the financial collapse of the 1930s:
- Economic prosperity depends on financial stability.
- Policymakers must act forcefully and creatively.
- International crises demand an international response.
- History is never a perfect guide.
The Fed chief made his remarks at a dinner where he was presented with the Hamilton Award for government leadership.