A Lesson From Ben Bernanke

Since I don't know very much about economics I didn't expect the 60 Minutes story on FED head Ben Bernanke to increase my understanding of the stock market, the credit church or derivatives, but I was curious about how Mr. Bernanke would answer his Snell's Law Questions. Snell's Law? I figure if Murphy can have one so can I, and the Snell's Law of media interviews is this: "The question you most dread will be asked."
 
Chairman Bernanke's Snell's Law question came from 60 Minutes Correspondent Scott Pelly. "You know Mr. Chairman, there are so many people across this country who say, you know, 'to hell with them. The wages of failure on Wall Street should be failure.'"

It my be that Mr. Bernanke came up with his answer on the spot, but my guess is he'd anticipated his Snell's Law question and prepared this analogy in advance.

"If you have a neighbor who smokes in bed and he's a risk to everybody. And suppose he sets fire to his house. You might say to yourself, 'I'm not going to call the fire department. Let his house burn down, it's fine with me." But then, of course, what if your house is made of wood and it's right next door to his house. What if the whole town is made of wood? I think we'd all agree that the right thing to do is put out that fire first and then say, 'What punishment is appropriate? How should we change the fire code? What needs to be done to make sure this doesn't happen in the future? How can we fireproof our houses?' That's where we are right now. We have a fire going on -- it's still burning."

Okay, that's why the bail-outs, but how about the other Snell's Law question hanging over the economic meltdown? 60 Minutes showed us the vault in the Federal Reserve Bank in New York with pallets of hundred dollar bills, making the point that one of the FED's most important responsibilities is regulating the nations banks, to be the watchdog. So why didn't it do a better job?

Chairman Bernanke again: "We had a regulatory system that was like a sand castle on the beach. When you had little small waves lapping up against the sand castle, everything looked good. But when you had a big breaker come in, suddenly the system wasn't strong enough to deal with it."

A little weak, perhaps, but, from a communication standpoint, you have to applaud the effort. It makes the point that, when you expect to be confronted with a Snell's Law question, it's worth the time it takes to come up with an analogy or some other way to simplify your complex subject.

A lesson from Ben Bernanke.