The Courage to Act: A Memoir of a Crisis and Its Aftermath.

• Author: Allison, John A., IV
• Position: Book review

The Courage to Act: A Memoir of a Crisis and Its Aftermath

By Ben S. Bernanke

New York: Norton, 2015.

Pp. xiv, 610. $35 hardcover.

The Courage to Act is a comprehensive description of the recent financial crisis and the subsequent recovery from the U.S. Federal Reserve's perspective. According to Ben Bernanke, the Federal Reserve made a few errors in not more tightly regulating the large banks before the financial crisis, but precrisis monetary policy was not a factor in creating the financial bubbles that preceded the crisis. Fortunately, the book assures us, the Fed's courage to act boldly and innovatively prevented the worst depression in human history. The Fed team was composed of people of action who made a mistake or two, but without their brave decisions the world's economy would be in serious trouble today.

The book also provides an interesting history of Bernanke's personal life, including his growing up in a small southern town and his experience in the academy. There are also numerous stories about meetings, dinners, and the like where critical decisions were made. If you are interested in seeing "how the sausage is produced," the book provides many details.

Bernanke also offers opinions on all the key players during the crisis. Those who agreed with him are seen as thoughtful and insightful. Those who disagreed with him are not so thoughtful or insightful.

Bernanke believes that the Fed's actions are the primary reason the U.S. economy is doing so well today relative to the European Union (EU). He attributes the EU's slower recovery primarily to ineffective fiscal and monetary policies.

Bernanke is critical of Freddie Mac and Fannie Mae and believes these two government-sponsored enterprises played a significant role in creating the housing bubble that contributed materially to the financial crisis.

On numerous occasions during the crisis, he expressed the opinion that monetary policy had strict limits and criticized Congress for its fiscal policy. However, he quickly argues for more monetary stimulus and ultimately concludes that monetary stimulus saved the day. He argues that the repeal of the Glass-Steagall Act was not a factor in creating the financial crisis and may have actually reduced risk. Also, he is opposed to breaking up the large banks and prefers tight regulation. Interestingly, the Fed seriously considered nominal gross domestic product (GDP) targeting but firmly rejected the idea.

Bernanke describes himself as a...