By Ryan Tracy
NEW HAVEN, Conn.--Former Federal Reserve Chairman Ben Bernanke and former Treasury Secretaries Henry Paulson and Timothy Geithner gathered last week in an auditorium to reflect on their response to the 2008 financial crisis.
Their audience: A global group of government officials who might have to respond to the next one.
The closed-door reunion last week, which marks the trio's first joint panel discussion since they left office, is part of a new effort at Yale University to update the playbook for dealing with financial panics. The scholars are calling it a "New Bagehot," referring to Walter Bagehot's famous 1873 book that central bankers still use as a guide for crisis management.
Mr. Geithner, who helped organize the gathering, called it "a master class in financial crises for the firefighter, focused on the very practical craft of making choices in the fog of war in the midst of a panic." Rather than looking at how monetary policy or regulations might prevent a crisis, this class addresses another, less commonly asked question, he said: "What do you do when the system is burning?"
That Messrs. Geithner, Bernanke and Paulson, who have been vilified in some quarters for engineering Wall Street bailouts and emergency-lending programs, would be guest speakers at such a course unnerves some of their detractors.
"You can learn from them--nothing wrong with that. But you need a very critical view of what was done," said L. Randall Wray, a senior scholar with the Levy Economics Institute think tank who has criticized the bailouts. "The presumption that 'what they did stunk, but it saved us' is just the wrong lesson."
Andrew Metrick, a professor and deputy dean at the Yale School of Management, who is running the Program on Financial Stability, said his goal isn't to rehash debates about the wisdom of the bailout programs.
Instead, Mr. Metrick is using the event along with research funded by the Alfred P. Sloan Foundation to create case studies that look at the details of the various financial-sector support programs, including commentary from their designers and academic research on their effectiveness.
"We don't have a lot of after-engagement reports that you would write if you were coming from war," Mr. Metrick said. "We've got to do that before everybody forgets."
Mr. Metrick's program began last year, with a sort of regulatory summer camp that schooled government officials about financial crises. Staffers from financial-sector oversight agencies around the world gathered at the Ivy League campus. They bunked in the same hotel, took a hiking excursion and spent two weeks dissecting topics including the demise of Lehman Brothers.
This year, new students are attending. Mr. Geithner has also joined the program as an adviser and helped add a new wrinkle: Three days of presentations by more senior officials, each telling war stories about being in charge when the country was at the brink of economic calamity.
Two former Federal Reserve Bank of New York officials gave a presentation about the Fed's credit and lending programs. A pair of former managers from the Treasury Department described the design of bank stress tests. Officials from the European Central Bank, Japan, Sweden, Mexico and Malaysia described their experiences with financial crises. Fed Vice Chairman Stanley Fischer also spoke.
The event was closed to the public, a decision the organizers said was made to encourage frank discussions by government officials. Messrs. Geithner, Bernanke and Paulson didn't offer new revelations while chewing on topics like the decision to allow Lehman's failure or to support the insurer American International Group Inc., according to people who heard their remarks.
Bank of Mexico Governor Agustín Carstens was in the audience. "Hindsight is very, very powerful," he said in an interview. "You could see the importance of having the ability to combine both their own technical knowledge and also to be able to put together a tactic that would work through the political system."
People who attended the sessions said officials talked repeatedly about how they had few resources to draw on once the crisis hit.
"Everybody says, 'We were not ready for this. We had to fly by the seat of our pants because that's all we had,'" Mr. Metrick said.
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