Author and Journalist David Wessel Visits Oxy
In September of 2008, the already palatial halls of the Federal Reserve Building in New York City were undergoing renovation. The building that stood as a monument to the nation’s wealth and financial power had literal roots leagues beneath its floors: in vaults deep below lay hundreds of billions of dollars in gold—much not our own—a not-so-subtle reminder of the building’s significance. The Fed, though, isn’t alone in its prominence. Add this structure to the dozens of skyscrapers of lower Manhattan, and it becomes clear that the American financial system in September of 2008 wasn’t just dawdling along. It wasn’t simply making ends meet. No, the American financial system was the best in the world.
“Not!” said David Wessel, economic editor of the Wall Street Journal, Pulitzer Prize-winning journalist, and author of the new book, In Fed We Trust: Ben Bernanke’s War on the Great Panic. The crowded Fowler classroom chuckled. One can say retrospectively that the above assertion of the strength of the American financial system should, at the very least, carry a prominent asterisk. More appropriate, though, would be Wessel’s thorough explanation to the eager group. In much the same way that his book makes the events of September 2008 more accessible, David Wessel, the first speaker this year in the DWA department’s Brown Bag series, visited Oxy and shed light on some of the characters and characteristics of the greatest economic crisis in decades.
Wessel’s brisk negation was not a simple statement of disapproval or cynicism, or even just a clever way to garner laughs. Rather, it was a legitimate reflection of the speed at which the highest tiers of American banking, government, and media came to know the shadowy vulnerabilities of the financial sector. The failure of Lehman Brothers in mid-September 2008 shook to the core those who believed in eternal American prosperity (at least on Wall Street). The “too big to fail” paradigm suddenly held no water. But instead of some torrent as a result, the stream of credit dried up, and the so-called Great Panic ensued.
The subtitle of Wessel’s book, “Ben Bernanke’s War on the Great Panic,” captures the work’s more lengthy analysis of the Fed chairman’s attempts to open those frozen valves once again and return life to the struggling economy. Among his journalistic critiques, there is genuine admiration for the work of the academic who ran the Fed through trying times under the mantra of “whatever it takes,” and who today remains at the helm of one of the most controversial arms of American government thanks to, in Wessel’s words to the Oxy community, an “innovative and gutsy” style.
Those who attended the Brown Bag event also heard Mr. Wessel’s take on what is sometimes referred to as the “fourth branch of government,” the Federal Reserve. Key to the controversy is the very nature of the Fed: run by very few unelected individuals, many of whom share a common company background, the Fed handles vast sums of American taxpayer money in an arguably extrademocratic way. The American president, even, has far greater barriers to the same actions taken by Bernanke in 2008. But regardless of the institution’s political repute, Wessel insisted that Bernanke’s use of the Fed’s tools prevented a crisis that might have rivaled or exceeded the legacy of the Great Depression.
But the journalist cautioned the audience against imagining the Fed’s work to be over. In fact, Wessel outlined three major challenges Ben Bernanke will face in the coming months. Casting a shadow over any actual monetary policy to be made, the widespread public suspicion of the Fed will prove an obstacle to any Bernanke action. That action, though, will be crucial, and its timing both delicate and pivotal. The Fed chairman will have to make two serious policy decisions. He will first have to decide when to raise interest rates from their near zero level. Then, he faces the question of when to begin pulling back some of the more than $2 trillion in credit the Fed has currently lent. According to David Wessel, either decision has potentially grave consequences. Perhaps his next book will serve as a conclusion to a particularly critical period in American history.
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David Wessel represents the kind of thoughtful and articulate guest speaker characteristic of the Brown Bag series, a guest who brings pertinent and practical analysis to the Occidental College campus. In addition to writers studying contemporary issues, the Brown Bag series has hosted writers and non-writers alike, each of whom shares work that is relevant, distinguished, and applicable to Oxy’s DWA department and the Oxy community as a whole. The next Brown Bag event will take place on October 1, featuring the former Prime Minister of Norway and founder of the Oslo Center for Peace and Human Rights, Kjell Magne Bondevik.
