Ben Bernanke, the outgoing chairman of the Federal Reserve, schooled a group of educators last night about the economy, the banking system, financial literacy, and the importance of teachers.
In a live-streamed event from Washington, D.C., Bernanke—whose tenure at the helm of “the Fed” ends in January, presided over a program that was billed as a “Teacher Town Hall: 100 Years of the Federal Reserve.”
In addition to giving a history lesson about the Federal Reserve and making remarks about the increased transparency of the U.S. central bank, Bernanke fielded teachers’ questions in the hour-long program. Here’s how he responded on a variety of topics.
On the Fed’s role in the future:
The most sensible way forward is for the government to continue to be careful. We want to make sure government money is spent in an intelligent way … and that we’re not doing anything that will slow down the recovery, while at the same time making sure we address long-term issues [like the] deficit and debt.
On the growth of big banks, and whether enough controls are in place to avoid another bailout of financial institutions that are deemed “too big to fail:”
One set of tools we’re strengthening is the requirement that banks hold a lot of capital and a lot of liquidity … We have new capital rules that require banks to be financed to a greater extent by equity, rather than by debt. For higher liquidity, we’re requiring more cash and cash-like instruments—like Treasury bills—that they’ll have to cash in to pay off, if there is a run [on banks] like there was in 2008.
Every year, we put big banks and medium-sized banks through a stress test: what would your balance sheet look like if another recession hit? We don’t allow them to pay a dividend to shareholders unless they can show they have enough capital to withstand a really serious crisis.
We are toughening supervisory rules, strengthening the Volcker Rule, which limits [banks’] abilities to make investment bets on their own accounts. That will take some of the risk out of the banking system.
On financial literacy being taught in schools:
I’m pleased to see that financial literacy is becoming a bigger part of high school and even middle school curricula. It’s also important for the country and economy when we have a smart, disciplined (citizenry) so that maybe we can avoid some of the problems we faced during the financial crisis.
On teaching financial literacy effectively:
It’s a very important lesson, but how do you get kids to learn this stuff? It isn’t that easy and research on it is kind of mixed. My own sense is that kids like to roleplay. There are some really good programs like Junior Achievement’s Finance Park program, where students are given a role to play in a simulation, and asked, “How are you going to make ends meet?”
[Lesson plans from the Federal Reserve itself are available on the Fed’s education website.]
On his most influential teachers:
I’ve had a lot of very important teachers. Part of [being a good teacher] is about the subject matter—the math teacher or history teacher who makes the student excited about learning that subject. Teachers also model commitment and dedication, and students will respond to a teacher who cares about them and cares about their learning.
As a former school board member, college professor, textbook writer… I’m very interested in education; it’s very important for our young people, our economy, and our country.