Leaving PIMCO.com

You are now leaving the PIMCO website.

Skip to Main Content
Economic and Market Commentary

Two Former Fed Leaders Decode Central Banks: Part 2

In this two-part series, former Fed chairman Dr. Ben Bernanke, who is now a senior advisor at PIMCO, and Dr. Richard Clarida, a former Fed vice chairman who now is PIMCO’s global economic advisor, share policymakers’ playbook for navigating global challenges. For other insights and our latest economic outlook visit: pimco.com/secular.

Text on screen: PIMCO

Text on screen: PIMCO provides services only to qualified institutions and investors. This is not an offer to any person in any jurisdiction where unlawful or unauthorized.

Images on screen: The Federal Reserve building, Dr. Ben Bernanke and Richard Clarida speaking at press conference.

Voice-over: The Federal Reserve is known as the orchestrator of the world’s largest economy. In this 2-part series, you’ll hear a conversation between Former Fed chairman Dr. Ben Bernanke, who served during the global financial crisis and is now a senior advisor at PIMCO, and Dr. Richard Clarida, who was the Fed vice chairman during the early days of the Covid-19 pandemic and now is PIMCO’s global economic advisor. In this episode, they’ll reflect on their time at the Fed and share insights about PIMCO’s investment process.

Text on screen: How did the Fed navigate crisis during your tenure?

Images on screen: The Fed building

Bernanke: The global financial crisis was a very stressful two years.

Text on screen: Dr. Ben Bernanke, Former Fed Chairman and Senior Advisor to PIMCO

The Fed tried to deal with a financial system that was close to collapse globally. We did three things. We provided a lot of liquidity, cash against collateral, and not only for the banking system, which is what the Fed is supposed to do, but throughout the entire financial system and even some non-financial firms using various emergency powers. The second thing we did was we tried to prevent the collapse of major financial firms.

And ultimately we had to work with the treasury and the Congress to pass the TARP bill that gave us capital that we could put into the banks and help them stabilize. That was really important. And then, as Rich knows from another crisis, easy money can support an economy that needs help. And certainly the financial crisis put us into a deep recession. So the Fed cut interest rates to zero and began to undertake other kinds of policies to try to provide some support for an economy that was hit very hard by that crisis.

Text on screen: Dr. Richard Clarida, Former Fed Vice Chairman and Global Economic Advisor at PIMCO

Clarida: Well hit hard. The pandemic collapse. Ben, I come to calling it the pandemic collapse, not crisis. It was a public health crisis, but we very much and very self-consciously pulled out the Bernanke playbook. We cut rates to zero. We did a purchase program. We provided a lot of liquidity in some cases, literally opening the file cabinets and taking out the facilities that you put in place. The challenge we faced is in the US and globally, the entire economy was being shut down for public health reasons.

And you're thinking, how do we operate a financial system if there are no revenues coming in to make coupon payments or pay workers or make lease payments.

And so we had to go an additional step, which was to announce program to support the corporate bond market and municipal bond market. I'm very proud of the fact that, the Fed never wanted to be lender of first resort, we were the lender of last resort, those facilities were priced out of the money. There was very little take up because private markets opened, which was the intent. But a different crisis, but in many ways, we were able to benefit from what you did and then move into the announcing these programs that in the end, very little take up, which we viewed as a success.

Text on screen: What are among the most memorable aspects of your time at the Fed?

Images on screen: The Fed building

Bernanke: Well, financial crisis is not a very pleasant experience. There were a lot of stressful weekends and a lot of work.

Clarida: Before Asia, what was it?

Bernanke: Before Asia opens. Yeah. I was thinking of titling my memoirs before Asia opens because everything had to happen by a certain time on Sunday evening before the Asian markets opened. So that of course was very difficult. And then you had to have a fairly good ego because there was a huge amount of criticism coming from the public and from Congress. And, I got to hear that firsthand when I testified before Congress, which I did more than 80 times when I was chair.

So, there's a lot of stresses involved. The positive side, I think there are many positives, but one of them is that my background, as is Rich, is as academic. I was a professor for 23 years. And we have, the Fed has such a high quality of staff, PhD economists, who can provide real interesting perspectives on the issues that the Fed and policy makers have to confront.

And I always found that really interesting and I would often have conversations with staff members just about what they were working on as opposed to something about the next meeting.

Clarida: Similar. I guess I'll highlight a couple things. One thing about the fed of necessity is, because of what you do and where it fits into the economic and financial system, it can be a pretty lonely place. You can't go to cocktail, when people say, what do you, what'd you do at the office today?

But what that means, given how intense it was, and every day you are either making a decision or doing the analysis you'll need to make a decision that is not only setting monetary policy for the US but for the global economy.

So I found it to be a real bonding experience among the people I could talk to because we all sort of realized the only people we could really talk to about what was on our mind were our colleagues, because you can't really share it with too many others. The part I missed the least was the last half of my time as Vice-chair was in the pandemic and the Fed went very quickly in March of 2020 to work from home monetary policy.

I think it's remarkable what we got done, in fact in those days of March, the Fed staff had not gotten video conferencing to a level they felt comfortable with. So we did all of that crisis stuff, more or less like you all were doing it on conference calls. But I did miss the interaction with colleagues, the face-to-face the last year and a half.

Text on screen: How does PIMCO’s investment process and Secular Forum frame its macroeconomic views?

Images on screen: PIMCO forum

Bernanke: One thing I like about working with PIMCO is that its decision process in many ways does parallel the Federal Reserves approach. Because the goal is of the forums in particular is to try to create a story about how the economy is and how it's going to evolve over the next three to five years. And how the political aspects, geopolitical aspects affect that. And once there's a well-defined, and agreed upon sort of picture, outlook, together with all the risks and uncertainties that are around that, that provides the background for investment decisions.

And the Federal Reserve operates very much in the same way, the staff provide forecasts and alternative scenarios. And it's all discussed. And that's how policy is made. And one other thing which I think is important, PIMCO brings in outside, very good high quality, outside speakers who come in and give different perspectives. The Fed doesn't do that quite as formally, but  certainly the board and the FOMC meet with outside groups and others who bring a different perspective so that they can hear a different perhaps, opposing view before making a decision.

Clarida: Well, I would not disagree with that. I would point out one thing that Jay Powell and I did during my time there is we sort of formalized that we would have four, six times a year, we would have, we invited outside groups. Sometimes an academic group, sometimes focused on market experience. Needless to say the Fed was in listening mode. But the other thing I would complement your view on that is one thing that I enjoy, and of course it's good things since I'm charged with sort of overseeing the process, is PIMCO does both the cyclical four times a year. So looking ahead three to six months. And then does carve out one week a year to try to look ahead three to five years. And that goes all the way back 40 plus years ago. And obviously we take it quite seriously. I've really seen the value of having frequent quarterly meetings and then once a year carving out time to do the three to five years. So I think it's a good process. It served us well.

Text on screen: For more insights and information, visit pimco.com

Text on screen: PIMCO

Disclosure


IMPORTANT NOTICE

Please note that the following contains the opinions of the speakers as of the date noted, and may not have been updated to reflect real time market developments. All opinions are subject to change without notice.

All investments contain risk and may lose value.

Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.

This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This is not an offer to any person in any jurisdiction where unlawful or unauthorized. | Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660 is regulated by the United States Securities and Exchange Commission. | PIMCO Europe Ltd (Company No. 2604517, 11 Baker Street, London W1U 3AH, United Kingdom) is authorised and regulated by the Financial Conduct Authority (FCA) (12 Endeavour Square, London E20 1JN) in the UK. The services provided by PIMCO Europe Ltd are not available to retail investors, who should not rely on this communication but contact their financial adviser. | PIMCO Europe GmbH (Company No. 192083, Seidlstr. 24-24a, 80335 Munich, Germany), PIMCO Europe GmbH Italian Branch (Company No. 10005170963, Corso Vittorio Emanuele II, 37/Piano 5, 20122 Milano, Italy), PIMCO Europe GmbH Irish Branch (Company No. 909462, 57B Harcourt Street Dublin D02 F721, Ireland), PIMCO Europe GmbH UK Branch (Company No. FC037712, 11 Baker Street, London W1U 3AH, UK), PIMCO Europe GmbH Spanish Branch (N.I.F. W2765338E, Paseo de la Castellana 43, Oficina 05-111, 28046 Madrid, Spain) and PIMCO Europe GmbH French Branch (Company No. 918745621 R.C.S. Paris, 50–52 Boulevard Haussmann, 75009 Paris, France) are authorised and regulated by the German Federal Financial Supervisory Authority (BaFin) (Marie- Curie-Str. 24-28, 60439 Frankfurt am Main) in Germany in accordance with Section 15 of the German Securities Institutions Act (WpIG). The Italian Branch, Irish Branch, UK Branch, Spanish Branch and French Branch are additionally supervised by: (1) Italian Branch: the Commissione Nazionale per le Società e la Borsa (CONSOB) (Giovanni Battista Martini, 3 - 00198 Rome) in accordance with Article 27 of the Italian Consolidated Financial Act; (2) Irish Branch: the Central Bank of Ireland (New Wapping Street, North Wall Quay, Dublin 1 D01 F7X3) in accordance with Regulation 43 of the European Union (Markets in Financial Instruments) Regulations 2017, as amended; (3) UK Branch: the Financial Conduct Authority (FCA) (12 Endeavour Square, London E20 1JN); (4) Spanish Branch: the Comisión Nacional del Mercado de Valores (CNMV) (Edison, 4, 28006 Madrid) in accordance with obligations stipulated in articles 168 and  203  to 224, as well as obligations contained in Tile V, Section I of the Law on the Securities Market (LSM) and in articles 111, 114 and 117 of Royal Decree 217/2008, respectively and (5) French Branch: ACPR/Banque de France (4 Place de Budapest, CS 92459, 75436 Paris Cedex 09) in accordance with Art. 35 of Directive 2014/65/EU on markets in financial instruments and under the surveillance of ACPR and AMF. The services provided by PIMCO Europe GmbH are available only to professional clients as defined in Section 67 para. 2 German Securities Trading Act (WpHG). They are not available to individual investors, who should not rely on this communication. | PIMCO (Schweiz) GmbH (registered in Switzerland, Company No. CH-020.4.038.582-2, Brandschenkestrasse 41 Zurich 8002, Switzerland). The services provided by PIMCO (Schweiz) GmbH are not available to retail investors, who should not rely on this communication but contact their financial adviser. | PIMCO Asia Pte Ltd (Registration No. 199804652K) is regulated by the Monetary Authority of Singapore as a holder of a capital markets services licence and an exempt financial adviser. The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Asia Limited is licensed by the Securities and Futures Commission for Types 1, 4 and 9 regulated activities under the Securities and Futures Ordinance. PIMCO Asia Limited is registered as a cross-border discretionary investment manager with the Financial Supervisory Commission of Korea (Registration No. 08-02-307). The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Investment Management (Shanghai) Limited Unit 3638-39, Phase II Shanghai IFC, 8 Century Avenue, Pilot Free Trade Zone, Shanghai, 200120, China (Unified social credit code: 91310115MA1K41MU72) is registered with Asset Management Association of China as Private Fund Manager (Registration No. P1071502, Type: Other) | PIMCO Australia Pty Ltd ABN 54 084 280 508, AFSL 246862. This publication has been prepared without taking into account the objectives, financial situation or needs of investors. Before making an investment decision, investors should obtain professional advice and consider whether the information contained herein is appropriate having regard to their objectives, financial situation and needs. | PIMCO Japan Ltd, Financial Instruments Business Registration Number is Director of Kanto Local Finance Bureau (Financial Instruments Firm) No. 382. PIMCO Japan Ltd is a member of Japan Investment Advisers Association, The Investment Trusts Association, Japan and Type II Financial Instruments Firms Association. All investments contain risk. There is no guarantee that the principal amount of the investment will be preserved, or that a certain return will be realized; the investment could suffer a loss. All profits and losses incur to the investor. The amounts, maximum amounts and calculation methodologies of each type of fee and expense and their total amounts will vary depending on the investment strategy, the status of investment performance, period of management and outstanding balance of assets and thus such fees and expenses cannot be set forth herein. | PIMCO Taiwan Limited is an independently operated and managed company. The reference number of business license of the company approved by the competent authority is (112) Jin Guan Tou Gu Xin Zi No. 012. The registered address of the company is 40F., No.68, Sec. 5, Zhongxiao East Rd., Xinyi District, Taipei City 110, Taiwan (R.O.C.), and the telephone number is +886 2 8729-5500. | PIMCO Canada Corp. (199 Bay Street, Suite 2050, Commerce Court Station, P.O. Box 363, Toronto, ON, M5L 1G2) services and products may only be available in certain provinces or territories of Canada and only through dealers authorized for that purpose. | PIMCO Latin America Av. Brigadeiro Faria Lima 3477, Torre A, 5° andar São Paulo, Brazil 04538-133. | No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America LLC in the United States and throughout the world. ©2023, PIMCO.

CMR2023-0515-2898952

In this two-part series, former Fed chairman Dr. Ben Bernanke, who is now a senior advisor at PIMCO, and Dr. Richard Clarida, a former Fed vice chairman who now is PIMCO’s global economic advisor, share policymakers’ playbook for navigating global challenges. For other insights and our latest economic outlook visit: pimco.com/secular.

WATCH PART 1

Featured Participants

Tell us a little about you to help us personalize the site to your needs.

Terms and Conditions

Please Read the Terms & Conditions
{{!-- Populated by JSON --}}
Select Your Location

Americas

Asia Pacific

Europe, Middle East & Africa

  • The flag of Europe Europe
Back to top