Bernanke’s reading list

Bernanke appeared at the hearing of Financial Crisis Inquiry Commission recently. As per Economix blog he was asked by one of the members on his reading list:

The member, Keith Hennessey, a former economic adviser to Mr. Bush, had asked Mr. Bernanke about how to define systemic risk. Then Mr. Hennessey posited this question:

I’ll end with an easy one. Other than your own speeches, what do you think are the most important writings on the crisis as a whole? If you could recommend that people read two or three really good speeches, books, papers, whatever they happen to be, what are the most important or underappreciated works out there?

The commission’s chairman, Phil Angelides, chimed in: “And by the way, that’s pre-Dec. 15, when our report comes out.”

The audience laughed. But Mr. Bernanke took the question seriously, responding this way:

Well I think there’s a lot of interesting work. I know you’re familiar with the sort of the narrative histories and so on. And I won’t bother to go over those. But I think there — again, not to sound too professorial, there is some interesting academic work already looking at these issues.

And I even made reference in my testimony to Gary Gorton’s work, where he is pretty clear to identify the analogies between what happened to the shadow banking system and classic bank runs — 19th-century-style bank runs. I think that work is very interesting.

There’s also quite a bit of interesting work by people like Markus Brunnermeier at Princeton which looks at the dynamics of a panic in the repo market and how that cycle of increasing haircuts in margin worked. And he and others have also done some of the work I referred to a moment ago in trying to identify systemically critical firms by looking at their financial characteristics. Maybe I can come up with a few other things, given a bit of time, but there is some interesting work under way in this area.

Mr. Hennessey replied, jokingly: “Thank you. Could you provide us Chairman Bernanke’s fall reading list?”

Mr. Bernanke, without missing a beat, responded: “Only if you take a test on it.”

Moments later, Mr. Bernanke did add a book to the assignment: Liaquat Ahamed’s “Lords of Finance: The Bankers Who Broke the World,” published last year by The Penguin Press. Upon reading the Pulitzer-winning book about the Great Depression, Mr. Bernanke told the commission, one can’t help but ask: “Doesn’t this seem awfully familiar?”

🙂 Much of the papers and reading list have been discussed extensively on blogs etc. But anyways, if people have not read them, they should.