This lesson introduces students to the Chairman of the Federal Reserve System, Ben Bernanke. It describes briefly his involvement within the Federal Reserve.
- Explore the background of Ben Bernanke, the Federal Reserve Chairman.
- Use previous knowledge, interests, and material from this lesson in a KWL chart activity on the Federal Reserve, Allan Greenspan, and Ben S. Bernanke.
Many Americans regard the Chairman of the Federal Reserve System as one of the nation’s most powerful officials, second only to the President. The influence of the Federal Reserve Chairman stretches beyond the borders of the United States, affecting the monetary policy and market conditions of nations throughout the world. Yet, to many Americans, the workings of the Federal Reserve System and the duties of the Chairman are mysteries. The purpose of this lesson is to:
- Examine the historical development of the Federal Reserve System.
- Provide background on Ben Bernanke, the new Federal Reserve Chairman.
- Provide additional resources for social studies teachers who wish to teach about the Federal Reserve System and monetary policy in their classrooms.
The Federal Reserve Website: This website provides information on Ben Bernanke that will help the students throughout the lesson.
Council for Economic Education: Teachers might consider using lessons on the Great Depression from the Council for Economic Education's Focus: Understanding Economics in U.S. History curriculum.
The KWL chart will be completed by students in the course of the lesson. Their work on the KWL will provide a record of their learning and enable you to assess their learning at the end of the lesson.
This interactive provides a timeline, with photographs, of Federal Reserve Chairman and their dates of service.
Federal Reserve Chairman and their dates of service
Ben Bernanke's Greatest Challenge: This link provides a two part video interview with Ben Bernanke, chairman of the Board of Governors of the Federal Reserve System, as well as the interview in article form. In these interviews, Bernanke talks about how the United States got into the "economic crisis" it did and what is being done to fix it.
Start by having the students use the KWL chart. Instruct them to fill in the first two columns with what they know, and what they want to know, about the Federal Reserve System, Alan Greenspan, and Ben S. Bernanke. Then have them work through the information in the lesson and complete the other activities.
Alan Greenspan retired as Chairman of the Board of Governors of the Federal Reserve System on January 31, 2006. He served for over 18 years. He was originally appointed to the office as Chairman on August 11, 1987, by President Reagan. Mr. Greenspan was reappointed to the Board for a full 14-year term, which began February 1, 1992. He was appointed Chairman by Presidents Ronald Reagan, George H. W. Bush, William Clinton, and George W. Bush. Mr. Greenspan served the second-longest term in the history of the Federal Reserve (Only William McChesney served longer). Click here to view the photographs and dates of service of the past Federal Reserve Chairmen.
Chairmen, Dates of terms:
Charles S. Hamlin Aug. 10, 1914-Aug. 9, 1916
William P.G. Harding Aug. 10, 1916-Aug. 9, 1922
Daniel R. Crissinger May 1, 1923-Sept. 15, 1927
Roy A. Young Oct. 4, 1927-Aug. 31, 1930
Eugene Meyer Sept. 16, 1930-May 10, 1933
Eugene R. Black May 19, 1933-Aug. 15, 1934
Marriner S. Eccles Nov. 15, 1934-Jan. 31, 1948
Thomas B. McCabe Apr. 15, 1948-Mar. 31, 1951
William McChesney Martin, Jr Apr. 2, 1951-Jan. 31, 1970
Arthur F. Burns Feb. 1, 1970-Jan. 31, 1978
G. William Miller Mar. 8, 1978-Aug. 6, 1979
Paul A. Volcker Aug. 6, 1979-Aug. 11, 1987
Alan Greenspan Aug. 11, 1987- January 31, 2006
Ben S. Bernanke January 31, 2006 - present
1. Whom did Alan Greenspan succeed, and in what year did this happen?
[Greenspan succeeded Paul A. Volcker in 1987.]
2. What did Greenspan do when the stock market crashed on October 19th, 1987? [ Having learned lessons from the actions taken by the Federal Reserve in 1929, Mr. Greenspan took steps to keep liquidity in the system to prevent this crash from spreading beyond the financial markets.]
3. What are some other highlights of Greenspan's tenure as Chairman?
[In the late 1990s, Mr. Greenspan faced the financial collapse in Asia. He was able to soften the impact of this crisis on the U.S. economy. He presided over the boom in technology stocks during the 1990s and warned that the rapid growth may have been unwarranted. On December 5, 1996, he used the term “irrational exuberance” to express his concern that the bubble would burst.]
4. Greenspan presided over for the longest period of economic expansion in U.S. history. When did this period of expansion occur, and how long was it? [This period of expansion occurred March 1991–February 2000, it lasted approximately 9 years.]
5. Who succeeded Greenspan as Chairman of the Federal Reserve? What challenges does he face? [Ben S. Bernanke is the new Chairman. He must formulate monetary policy, monitor stock market fluctuations, monitor the economy, and provide leadership in efforts to deal with the current financial crisis, etc.]
How Is the Chairman Appointed?
Mr. Bernanke was appointed Federal Reserve Chairman through a process similar to the one used in other high level federal appointments. The Federal Reserve Act (FRA) of 1913 established the Federal Reserve System. The FRA explains who is eligible to serve on the Board of Governors and who may serve as Chairman; it also sets term limits. The FRA states that to become Chairman a person must be a member of the Board of Governors. This might suggest that only current Governors can serve as Chairman but in fact, as pointed out by Andrew Foerster of the Federal Reserve Bank of Richmond, a candidate can be simultaneously appointed Governor and Chairman. The President nominates people to serve as Federal Reserve Board Governors. Then the process moves to the Senate, where the nominee testifies before the Committee on Banking, Housing, and Urban Affairs. From there, the nomination moves to the floor of the Senate for a vote. The Chairman is appointed to a four-year term. The Chairman can serve several four-year terms, as did Alan Greenspan. These are a few of the "Most Frequently Asked Questions" about Mr. Bernanke. If you need some help, go back to the information above.
What was Mr. Bernanke’s most recent appointment before becoming Chairman of the Federal Reserve? [Mr. Bernanke was sworn in on June 21, 2005, as Chairman of the President's Council of Economic Advisers.]
What position did he hold before being appointed as Chairman of the President's Council of Economic Advisers? [Prior to his appointment to the Council, Mr. Bernanke served as a member of the Board of Governors of the Federal Reserve System. He was appointed on August 5, 2002, and resigned on June 21, 2005.]
What are Mr. Bernanke’s academic credentials for the Federal Reserve job? [Nominees for the Chairman of the Federal Reserve in the past have come from banking, government, academia, and from within the Fed. Mr. Bernanke is an academic. He has an impressive educational background. He received a B.A. in economics in 1975 from Harvard University (summa cum laude) and a Ph.D. in economics in 1979 from the Massachusetts Institute of Technology. Dr. Bernanke was a professor of economics at Princeton University from 1996 to 2002.]
Is Mr. Bernake regarded as a scholar? [Yes, Mr. Bernake is regarded as a scholar. Mr. Bernanke has published many articles on a wide variety of economic issues, including monetary policy and macroeconomics, and he is the author of several scholarly books and two textbooks. He has held a Guggenheim Fellowship and a Sloan Fellowship, and he was a Fellow of the Econometric Society and of the American Academy of Arts and Sciences. Mr. Bernanke served as the Director of the Monetary Economics Program of the National Bureau of Economic Research (NBER) and as a member of the NBER's Business Cycle Dating Committee.]
- Does Mr. Bernake have any background as a leader in K-12 education? [Yes, Mr. Bernanke served two terms as a member of the Montgomery Township (N.J.) Board of Education.]
The Chairman of the Federal Reserve System is widely considered to be one of the most powerful people in the world. This lesson introduces students to the new Fed chair, Ben Bernanke, while also reviewing some history and structure of the Federal Reserve System.
Ask the students to complete the "Learned" column in the KWL chart and evaluate the information they include. Instruct them to include the following information:
- Alan Greenspan's place in Fed history
- The structure of the Fed
- How the Federal Chairman is chosen
- Fed Chairman Ben Bernanke's background
If they need additional information, send them to www.federalreserve.gov for help.
Using the following information about the Great Depression, as written by Bernanke, start a discussion with the students (as a class or in small groups) about the Federal Reserve's role in the Great Depression. This information provides a concise summary; however, teachers might consider using lessons on the Great Depression from the Council on Economic Education store, Focus: Understanding Economics in U.S. History curriculum .
In his book, Essays on the Great Depression, Bernanke refers to the Great Depression as the “Holy Grail of macroeconomics.” “I guess I am a Great Depression buff, the way some people are Civil War buffs," he wrote in the book's preface. "I don’t know why there aren’t more Depression buffs. The Depression was an incredibly dramatic episode– an era of stock market crashes, bread lines, bank runs, and wild currency speculation, with the storm clouds of war gathering ominously in the background all the while.”
Between 1929 and 1933, the output produced in the U.S. plummeted by almost 30%. Further, the unemployment rate surged to over 25%, and more than 9,700 American banks failed. The huge number of bank panics occurring during this period was unprecedented, prompting President Franklin Roosevelt to make his famous statement, “The only thing we have to fear is fear itself.” The reasons for the onset of the Great Depression, causing unparalleled economic misery in the United States and around the world, have been widely debated. The Fed remained remarkably passive during the onset of the Great Depression. The Fed refused to perform its function as a lender of last resort (one of the major reasons for forming the Federal Reserve in 1913) for failing banks. The Board of Governors did not fully understand the negative impact that bank failures would have on the money supply and the economy in general. Milton Friedman and Anna Jacobson Schwartz discussed this in their influential book, A Monetary History of the United States, 1867 – 1960, reporting that the Federal Reserve “tended to regard bank failures as regrettable consequences of bank management or bad banking practices, or as inevitable reactions to prior speculative excesses, or as a consequence but hardly a cause of the financial and economic collapse in process.” Further, Friedman and Schwartz note, bank failures were concentrated among smaller banks while the Federal Reserve was controlled by big city bankers that “deplored the existence” of the smaller banks. In addition, the Federal Reserve System raised interest rates in 1931, which discouraged business borrowing and caused the money supply to shrink . With so much less money to go around, businesses could not get the loans they needed and were forced to stop investing.
What does Mr. Bernanke make of all this? He fully acknowledges the failings of the Federal Reserve System during the Great Depression. In fact, at a 2002 conference honoring Mr. Friedman’s 90th birthday, Bernanke, then a Federal Reserve Governor, told Friedman, “Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.” The Federal Reserve ’s response to more recent financial crises, like the October 1987 stock market crash and the economic downturn following the attacks of September 11th, 2001, suggest that they have learned their lesson from the Great Depression and won’t let such an event happen again.
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