Former U.S. Federal Reserve Chair Ben Bernanke, who put his academic expertise on the Great Depression to work reviving the American economy after the 2007-08 financial crisis, won the Nobel Prize in economic sciences along with two other U.S.-based economists for their research into the fallout from bank failures.
Bernanke was recognized Monday along with Douglas W. Diamond and Philip H. Dybvig. The Nobel panel at the Royal Swedish Academy of Sciences in Stockholm said the trio's research had shown "why avoiding bank collapses is vital."
Bernanke, 68, now with the Brookings Institution in Washington, examined the Great Depression of the 1930s, showing the danger of bank runs -- when panicked people withdraw their savings -- and how bank collapses led to widespread economic devastation. Before Bernanke, economists saw bank failures as a consequence, not a cause, of economic downturns.
When it comes to the global economic turmoil created by the COVID-19 pandemic and Russia's war in Ukraine, Diamond said the financial system is "much, much less vulnerable" to crises because of memories of the 2000s collapse and improved regulation. Bernanke, then head of the Fed, teamed up with the U.S. Treasury Department to prop up major banks and ease a shortage of credit, the lifeblood of the economy.
The Fed's actions under Bernanke extended the authority of the central bank into unprecedented territory. They weren't able to prevent the longest and most painful recession since the 1930s. But in hindsight, the Fed's moves were credited with rescuing the banking system and avoiding another depression.
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