Ben Bernanke, Douglas Diamond and Philip Dybvig are sacred for their work on the role of banks in financial crises.
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Is this a sign of concern for the near future? The 2022 Prix of the Bank of Sweden in tribute to Alfred Nobel was awarded to Ben Bernanke, Douglas Diamond and Philip Dybvig, three specialists in financial crises, and more precisely the major role that the fragility of banks play in the gravity of these crises .
Ben Bernanke is best known for having been the president of the American Federal Reserve (Fed) from 2006 to 2014, when he had to face the subprime crisis (2007-2008) by “saving” American banks by a Flood of redemptions of titles and bond emissions, the famous “quantitative EASING” (quantitative softening), quintuplely the Fed balance sheet at 4000 billion dollars. But it is not for this “feat” – today controversial because suspected of having “led to current overheating and inflation”, as Jean -Michel Naulot, former member of the Markets Authority underlines Financiers – that the economist is honored, but for his research on the history of the crisis of 1929.
“Banks are the nodes”
He has indeed shown that the main vehicle of the propagation of the crisis in the real economy (bankruptcies, unemployment, great depression) after the initial “Krach” of October is the cascade of closings of banks ruined by The collapse of Wall Street. Indeed, explains Augustin Landier, professor of finance at HEC, “banks are the nodes where information about economic, individual and businesses are confronted. If they disappear, this information is no longer available and the economy no longer works As long as confidence has not returned “. This demonstration of the academic Ben Bernanke, professor at Stanford, New York and Princeton, convinced the central banker Ben Bernanke that it was necessary, to curb the crisis of subprime which he admits in his memoirs to have first underestimated The impact, “save the banks”, whatever it costs – the shock caused by the bankruptcy of Lehman Brothers on September 15, 2008 had amply confirmed it.
For David Thesmar, MIT finance professor, Douglas Diamond and Philip Dybvig are two “pure” theorists, one at the University of Chicago, the other to that of Saint-Louis. They are rewarded for an article that economists call “canonical” or “seminal”, published in… 1983 in the Journal of Political Economy, “ Bank Runs, Deposit Insurance and Liquidity “. This article inaugurated a long list of research and publications by many of their colleagues on the weaknesses of the banking system and the means to remedy it. Because the two economists have shown, while barely starting fire from the financialization of the economy, that banks suffer from intrinsic weakness, inscribed in the very nature of their activity: their passive (the deposits they Collecting savers) is in the short term – since savers can withdraw them from the first sign of loss of confidence – while their assets (investments and investments in corporate or states) are long -term.
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