Federal Reserve documents 1 page

PRELUDE

CHAPTER 1

Main Street

The morning of September 1, 2006, was drizzly and unseasonably cool. Our three-vehicle caravan pulled out of the horseshoe-shaped driveway of the Abingdon Manor, a bed-and-breakfast in Latta, South Carolina. The manor, a 104-year-old mansion built in the Greek Revival style, is a ten-minute drive south of my hometown—Dillon, South Carolina. Stuffed with antique furniture, fine linens, and chintz curtains, the old house evoked the tastes of affluent Carolinians of earlier generations. After a speech in Greenville, on the western side of the state—where the preacher delivering the benediction had asked God to aid me in my task of making the nation’s monetary policy—I had spent the previous evening at the manor, dining and visiting with friends and family.

We pulled onto Highway 301 and headed toward Dillon. A local police car led the way. I sat in the backseat of the second vehicle, on the passenger side, as always. In front of me, next to the driver, sat Bob Agnew, the veteran agent in charge of the security detail. Dave Skidmore, a Federal Reserve media relations officer, sat to my left. Two more Federal Reserve security agents followed in the vehicle behind us.

At the polite but firm request of the security team, I had not driven a car in seven months. Bob and the agents of the Protective Services Unit were unfailingly friendly and courteous but always insistent on enforcing security protocols. They had been my constant companions since February 1, 2006, the day I was sworn in as the chairman of the Board of Governors of the Federal Reserve System. My predecessor, Alan Greenspan, had described life in the security bubble aptly. It was, he had told me, like being under house arrest with the nicest jailers you could imagine. The agents—as well as cable television camera crews—would shadow my every step that day in Dillon. As a boy, I had roamed the town

unaccompanied, pedaling my bicycle from home to the library or to my family’s pharmacy at 200 West Main Street.

We were headed to 200 West Main that morning. The space was now occupied by Kintyre House, a casual restaurant with an exposed-brick wall and polished wood floors. Instead of stocking the magazine rack or guiding a customer to the shampoo as I would have forty years earlier, I would breakfast with twenty or so Dillon notables—mostly elected officials and business owners. We filled our plates from a buffet offering fruit, grits, eggs Benedict with prime rib, and challah French toast. I wasn’t sure whether the challah was an allusion to my Jewish background, but, more importantly, I was glad to see that the breakfast attendees included both whites and African Americans. In the Dillon of my childhood, segregation was pervasive, with separate public restrooms and water fountains. The town’s black citizens would not have been able to eat in this restaurant at all, much less as part of a group of local leaders. Todd Davis, the mayor of Dillon, and Johnny Braddy, a town councilman who had played trumpet opposite my alto sax in the school band, joined the breakfast.

It was the first event of Ben Bernanke Day in Dillon, which would culminate in a ceremony on the front lawn of the ninety-five-year-old red brick Dillon County Court House, a block from the restaurant. I received the key to the city from Mayor Davis and the Order of the Palmetto, South Carolina’s highest civilian award, from Governor Mark Sanford. (Darius Rucker, lead singer and rhythm guitarist for the rock band Hootie & the Blowfish, had been a previous recipient.) I knew this award-giving was premature. I hadn’t been in the job long enough to point to any real accomplishments. But to see so many classmates, neighbors, and former teachers sitting on folding chairs on the front lawn of the Court House was touching nonetheless.

I had not been to Dillon in nearly a decade—not since my parents, Philip and Edna, had retired and moved to Charlotte, North Carolina, where my mother had grown up and where my younger brother, Seth, now lived with his own family. As a teenager, I could hardly wait to leave Dillon. But as I grew older, and especially after entering the Washington policy world, my thoughts often returned to my hometown. It was where I had learned about hard work, responsibility, and respect for others. When you work in an ornate government building, poring over faceless statistics and making grand plans, it can be too easy to forget where you came from. This day was a reminder. After the brief ceremony, I shook hands for an hour, desperately trying to put names to faces.

DILLON, WITH A POPULATION of about 6,500, lies just west of the Little Pee Dee River, which meanders through the farms, pine forests, and swampland of northeastern South Carolina. Established in 1888, Dillon is the seat of a county of the same name. The nearest town of any size, Florence, with a population of less than 40,000, is about twenty-five miles away. For much of my childhood, we had to drive to Florence to see a doctor other than the local general practitioner, or even to see a movie.

Both the town and the county were named after James W. Dillon, a local merchant, banker, and cotton

broker who headed a citizens’ drive to bring a railroad line to the area. Completed the same year as Dillon’s founding, the railroad opened the isolated area to the wider world. Amtrak’s Palmetto passenger train, traveling between New York City and Savannah, Georgia, still stops in Dillon twice a day. But now a visitor is more likely to arrive via Interstate 95. Dillon’s chief claim to fame today is South of the Border, a sprawling Mexican-themed tourist attraction just south of the state line. Wedding chapels and fireworks stores stand along the highway, strategically located to take advantage of South Carolina’s more lax regulations.

By providing a shipping point for cotton and tobacco and later textiles, Dillon’s railroad depot brought, for a while, a measure of prosperity. But by the time of my visit in 2006, Dillon had fallen on hard times. Tobacco, the area’s most important cash crop, had mostly vanished after Congress dismantled federal price supports. The textile industry—facing increasing competition from imports—was disappearing as well. Public services reflected a shrinking tax base. A few years after my visit, in 2009, eighth-grade student Ty’Sheoma Bethea drew national attention to Dillon by writing to members of Congress pleading for help for her dilapidated school—a school I had attended forty years earlier.*

HARD TIMES HAD originally propelled my family toward, not away from, Dillon. My grandfather, Jonas Bernanke, ran a series of pharmacies in New York City during the Great Depression, without much success. In 1941, at the age of fifty, he spotted a for-sale ad for a drugstore in Dillon and decided to start over. He moved south with his wife and three sons, including my father, the middle son.

Jonas, a broad-shouldered cigar smoker with a deep voice and a stern manner, projected Hemingwayesque machismo and self-confidence. He named the drugstore Jay Bee Drug Co., a play on his initials. Like all four of my grandparents, he was an immigrant. He was born in Boryslaw in what is now western Ukraine but was then part of the Austro-Hungarian Empire. Drafted into the army of Emperor Franz Josef I during World War I, he served as a corporal, although his stories always made it sound as if he were an officer. Sent to the Eastern Front, he was captured by the Russians. At war’s end he somehow made his way from a prison camp in Siberia, near Vladivostok, to Shanghai, and from there back to Europe via a steamship to Marseilles. In 1921, Jonas decided to try his luck in America. He and my grandmother, Pauline, known as Lina, steamed from Hamburg, Germany, to Ellis Island with 957 other passengers aboard the SS Mount Clinton. They arrived on June 30. Jonas was thirty. Lina was twenty-five and pregnant with her first child, my Uncle Fred. The ship’s manifest noted that they were steerage class passengers and that each was bringing $25 into the country.

Lina was remarkable in her own right. Born in Zamość, Poland, near the border with Ukraine, she had earned a medical degree in 1920 at the prestigious University of Vienna. After arriving in New York, she launched a small medical practice among Jewish immigrants on the East Side, while Jonas studied pharmacology at Fordham University. But Jonas’s decision to move the family south ended Lina’s medical career, since South Carolina did not recognize her European credentials. I recall Lina as

extremely intelligent, with refined European tastes. She was unhappy in Dillon, doubtless feeling out of place in the Bible Belt culture of the rural South of the 1940s and 1950s. Her marriage to Jonas, who could be volatile, was (as best as I could tell at my young age) often stormy. She raised her boys, and then in later life—especially after Jonas died, in 1970, of a heart attack—occupied herself with reading and painting. Like many assimilated European Jews, neither she nor Jonas had much use for traditional religious practice, although they occasionally attended services in Dillon’s small synagogue.

In their lack of interest in religious observance, Lina and Jonas contrasted strongly with my mother’s parents, Herschel and Masia Friedman (Americanized as Harold and Marcia). Herschel and Masia were orthodox Jews who kept a kosher home and strictly observed the Sabbath. They immigrated to the United States from Lithuania around the outbreak of World War I and had lived in Portland, Maine, and Norwich, Connecticut (where my mother was born in 1931), before moving to Charlotte, North Carolina—a two-and-a-half-hour drive from Dillon. Today Charlotte is a major banking center surrounded by affluent suburbs, but when my grandparents lived there it was sleepy and a bit down-at-the-heels. My first extended visit to their home came when I was three years old, when my parents took my infant sister, Nan, who was born with a heart defect, to Johns Hopkins Hospital in Baltimore for treatment. The treatment was unsuccessful, and Nan died at age three months. I spent a week with the Friedmans every summer until Masia’s death in 1967, when I was thirteen. Afterward, Herschel moved to Dillon and lived at our house. He died at age ninety-four or ninety-five. He wasn’t sure of his age himself; his parents manipulated their records to keep him out of military service.

Herschel was a kosher butcher, a Hebrew teacher, and the baal koreh (professional Torah reader) at Temple Israel, an old Charlotte congregation affiliated with the Conservative movement, which balanced acceptance of modernity with traditional observance. A Talmudic scholar, Herschel, besides his accented English, spoke multiple European languages and was fluent in Hebrew, Yiddish, and Aramaic. During summer visits, he taught me to play chess and to read and translate biblical Hebrew. He taught me to read and interpret some portions of the Talmud as well, but I didn’t have the patience for its complexities. To reinforce Herschel’s lessons, Masia would have me “teach” her Hebrew that she knew perfectly well.

In contrast to Lina, Masia was warm and outgoing—everything a boy could want in a grandmother. On pleasant summer evenings in Charlotte I would sit and talk with her for hours on the front porch. I trace my lifelong interest in the Great Depression to her stories of life in Norwich during the early 1930s. The family was proud they could buy new shoes for their children every year, thanks to Herschel’s job in a furniture store. Other children had to go to school in worn-out shoes or, according to my grandmother, even bare feet. When I asked her why their parents didn’t buy them new shoes, she said their fathers had lost their jobs when the shoe factories closed. “Why did the factories close?” I asked. She replied, “Because nobody had the money to buy shoes.” Even a small boy could see the paradox, and I would spend much of my professional career trying to better understand why deep economic depressions occur.

Grandma Masia cooked in the traditional Eastern European Jewish style. She made matzo ball soup

from scratch, brisket, and tzimmes (a sweet stew of carrots and yams). On May 23, 1958 the Charlotte Observer featured her recipe for blintzes. I was quoted in the article as asking, “Grandma, why don’t youteach my mommy to make blin-tzes?” I was four and a half years old, and it was my first recorded statement to the media. But it was not the last time that I would come to regret making an unguarded comment to a journalist.

My father was fourteen when his family moved to Dillon from New York City. He must have found the move disorienting, but we never spoke of it. In many ways he was the opposite of his imperious, barrel-chested father: physically slight (I doubt he ever weighed more than 125 pounds), shy, and gentle. He graduated from high school in Dillon and served in the navy during the last year of World War II. Except for a brief stint on a destroyer, he came no closer to the action than Reno, Nevada, where he was assigned to manage the post exchange. My father enjoyed the irony of having spent his navy career in the Nevada desert.

Philip met my mother, Edna, after the war, while pursuing a master’s degree in drama at the University of North Carolina at Chapel Hill. She was a student at the Women’s College of the University of North Carolina, now the University of North Carolina at Greensboro. He fell in love with her, but I think he also fell in love with the warmth of her religious family. He longed for community and a sense of belonging that had been absent from the austere atmosphere of his own home. My parents were married in Charlotte on June 15, 1952.

In our home, my mother preserved the traditions of her own parents, making sure that we observed the Jewish holidays and keeping a kosher kitchen in Dillon. Our meat was frozen and shipped by bus from Charlotte. My father was not strictly observant; for instance, he worked in the drugstore on Saturday, the Jewish Sabbath. But he embraced Jewish culture. He would sit in his chair in the evening, with a yarmulke on his bald head, reading books on Jewish philosophy and history. And, taking a break from work on Saturday, he enjoyed leading the family in singing the traditional blessings after lunch. While my father relished those lengthy blessings, my siblings and I raced to see how quickly we could complete them. We sounded like those disclaimers at the end of drug commercials.

While my father, like his mother, was a devotee of the arts and philosophy, my mother was, though intelligent, not particularly intellectual. She was hard-headed, pragmatic, a stickler for appearances—and a worrier. She worried how I was doing in kindergarten and sent my father to check on me. When I left home to attend Harvard University, she worried about whether I had the clothes and social skills to fit in. She must have had in mind the Harvard of the 1950s rather than the Harvard of torn blue jeans and protest rallies that I experienced in the early 1970s. And, in 2014, as I prepared to leave the Federal Reserve, she worried whether at age sixty I would be able to drive myself safely after an eight-year absence behind the wheel. (So far, so good.)

She and Philip, newly married, moved to North Augusta, South Carolina, where my father worked as the manager and stage director of a community theater. My parents were living there when I was born, on

December 13, 1953, on the other side of the Savannah River, in Augusta, Georgia. They named me Ben Shalom—son of peace, in Hebrew. With a wife and child to support, my father realized he would need to earn more money. He returned to Dillon to work for his father at the drugstore. His brother Mortimer— two years younger—was already working there.

My father learned pharmacology on the job and later passed the state licensing exam. Over time his theater days became a source of nostalgia, and whenever we went to the movies he would comment on various aspects of the direction and acting. Unlike his mother, however, who felt that her ambitions had been thwarted, he didn’t seem embittered. He believed that he was doing what he needed to do, and he worked diligently to be the best pharmacist he could be, studying up on new treatments, medications, and vitamins. In a town with few doctors, he was known as “Doctor Phil”—and my uncle as “Doctor Mort.” My father thought of himself more as a health-care provider than as a shopkeeper and, a half century before the CVS pharmacy chain stopped selling tobacco, Jay Bee Drugs did not sell cigarettes. He worked six days a week, often seven if emergency prescriptions needed to be filled on a Sunday. Typically I did not see him for dinner.

My mother, after spending an unsatisfying year teaching the fourth grade in Dillon, left to be a homemaker and worked half-time as the pharmacy’s bookkeeper. As a small boy, I was often left in the care of Lennie Mae Bethea, a black woman my parents employed to clean and cook. (She must have been one of the few black women in South Carolina well versed in the rules of keeping a kosher kitchen.) Although my parents always treated Lennie Mae respectfully, I was aware of the social distinctions between us, probably in part because Lennie Mae herself was so aware of those distinctions. As a child, I once innocently referred to her as our maid. “I ain’t nobody’s maid,” she told me. “I’m the housekeeper.” Lennie Mae worked for my parents until well after I left home for college. When she was no longer able to work, my parents (as I would learn later) provided her with a pension.

After the loss of my infant sister, my parents had two more children: Seth, five years younger than me, and Sharon, two years younger than Seth. Given the age differences, I didn’t spend a lot of time with my siblings, except when pressed into service as a babysitter. Today Seth is a worker’s compensation lawyer and Sharon is an administrator at a music conservatory in Boston. As adults, we and our spouses visit often and sometimes vacation together.

THE DILLON OF our childhood looked like many other southern towns. It still does today. A commercial district of one- and two-story brick-front buildings stretched for a half-dozen blocks along Main Street. During the 1960s, a mule-drawn wagon could still occasionally be spotted among the cars and trucks.

Further east, Main Street narrowed and became leafy and residential, with some fine old homes. One housed the Dunbar Library, a favorite childhood haunt. Once a gracious two-story home, the library held a musty collection of mostly donated books. On Saturdays I would bike there and ride home with three or four books in my basket.

Our family home at 703 East Jefferson Street, a three-bedroom brick ranch, was situated in a middle-class neighborhood, five blocks north of the larger and older homes along Main Street. My father had bought the house from his father at about the time I was entering first grade, and we moved from a smaller house a half-mile away. All of our neighbors were white. Much of Dillon’s substantial black population lived on the outskirts of town, along State Highway 57. Their houses were modest—some were mobile homes—and the streets unpaved. I didn’t have occasion to visit that neighborhood until, as a teenager, I sometimes gave Lennie Mae a ride home.

I attended East Elementary School through the sixth grade. It was close enough that I could sometimes walk home for lunch. From seventh to eleventh grade I took the bus across town to Dillon High, a few blocks from downtown and Jay Bee Drugs. During those years, I often walked to the drugstore after school. I’d do a little work but mostly I had the run of the place. I’d hang around and eat a candy bar, then catch a ride home with Moses, a black man with one arm who was employed by my father to deliver prescriptions. During the summers, my father paid me 25 cents an hour to work half days. I started out sweeping up, stocking shelves, and unpacking magazines. Eventually I was entrusted to work the cash register.

My academic career began auspiciously. I spent only two weeks in the first grade and, after it became clear that I already could read and add and subtract, was moved to second grade. I remember seeing a book on my parents’ shelves, with a title something like Your Gifted Child. I was six. I knew perfectly well what it was about.

At the age of eleven, I won the state spelling bee and a chance to compete in the National Spelling Bee at the Mayflower Hotel in Washington, D.C. I wanted to win because the winner would be introduced from the audience on the Ed Sullivan Show. I finished a disappointing twenty-sixth out of seventy contestants, adding an “i” to the first syllable of the word “edelweiss,” the name of an alpine flower. I had not seen the film The Sound of Music, which featured a song about edelweiss. By then, Dillon’s only movie theater, where as a younger boy I had paid a quarter to watch double features, had closed.

As a fourth and fifth grader, I favored young adult novels, often about sports, and, in my early teens, science fiction. As I grew older I read more widely. Teachers gave me books and articles to read on my own. My high school didn’t offer calculus, for instance, and I prepared for college math by working through the introduction to calculus in the Schaum’s Outline Series. I never read the business pages of the newspaper; I couldn’t relate to the stories.

I had many teachers whom I remember gratefully. In the fourth grade, I began taking saxophone lessons from the dedicated and indefatigable Helen Culp. She led a band—a marching band or concert band, according to the season—that gave me a low-pressure way to participate in the school community. Because of the band I was able to march at halftime during high school football games on Friday nights rather than attend the service at the synagogue.

Bill Ellis, a soft-spoken physics instructor, stoked my interest in science. As a high school junior, I

won a prize for achieving the highest score in the state on the Scholastic Aptitude Test, and when asked to designate my favorite teacher, I named Mr. Ellis. My prize was a seventeen-day bus trip through something like eleven European countries—my first time out of the country.

John Fowler, my English teacher in high school, encouraged me to write. During my junior year, he submitted seven of my poems to a competition run by the University of South Carolina. When they were published in a collection called The Roving Pen, I began to imagine myself as a writer. My father had paid me a penny a line as a young boy to write stories. Perhaps already understanding economic incentives, I wrote the stories in a large hand. Later, I drafted two-thirds of a young adult novel about black and white kids forming friendships on a high school basketball team. I submitted it to a publisher and received a kind, encouraging rejection letter.

The theme of my unfinished novel reflected what I was about to experience in my own life. Through the eleventh grade, the schools I attended were for white children only, with only a few exceptions. But in 1970, Dillon opened a new, fully integrated high school, where I spent my senior year. For the first time in my life, I had black friends my own age. I quit Miss Culp’s band to make time to edit and take photos for the class yearbook, was the valedictorian of the class of 1971, the new school’s first, and was also voted most likely to succeed. I felt more part of school that year than I ever had. The new school and integration jumbled social relationships and broke up cliques.

My modest social successes of senior year were new for me. Although I had gotten along well with most of my classmates, I was bookish and shy and often on my own. One of my best friends in my early teens was Nathan Goldman, also Jewish. We shared common interests in both baseball and math. During summer evenings, we’d spend hours immersed in Strat-O-Matic baseball, a board game played with three dice and a card to represent each player. I had played Little League baseball for one season, mostly as a benchwarmer, but I often stayed up late listening to Los Angeles Dodgers games on my father’s shortwave radio. I rooted for the Dodgers because their star pitcher, Sandy Koufax, was Jewish. I learned all the statistics of every Dodger player and lived and died with the fate of the team, especially when they played the despised San Francisco Giants. Sometimes, impatient for the late scores, I would call a friend at the local radio station and ask him to find out how the Dodgers had done.

Strat-O-Matic was designed to replicate the play-by-play action of real baseball and, through the course of a “season,” would produce statistics not much different from real baseball statistics. It was one of my first experiences of thinking in terms of probability and statistics. Eventually, Nathan and I wanted something more sophisticated than the commercial board game. So we replicated, as best we could, the baseball dice game featured in a novel I had read at around age fourteen—The Universal Baseball Association, Inc., J. Henry Waugh, Prop., by Robert Coover. The book is densely philosophical (itstheme is the relationship between God and morality), but at the time I was most interested in the baseball game it described. That the main character in the story, the inventor of the game, was driven insane by his obsession with it somehow escaped my notice.

I got my bookishness and introversion from my parents. The extroverts in the family were Uncle Mort and my brother, Seth. We didn’t travel much as a family, except for a week at Myrtle Beach, South Carolina, every summer—and even then, in the evening we’d all gather in silence in the family room, each with his or her nose in a book. My parents’ social life, such as it was, centered on the small synagogue in town, Ohav Shalom, meaning lover of peace.

A synagogue plunked in the middle of a small southern town isn’t quite the oddity it seems. Jews have lived in the region since before the Revolution, often making their living as merchants. In South Carolina, Jews had established a presence in the port city of Charleston by the early 1700s; they arrived in the Pee Dee region in the late 1800s, along with the railroad, opening stores in Dillon and nearby towns.

Temple Ohav Shalom, which, like Grandpa and Grandma Friedman’s temple in Charlotte, was affiliated with the Conservative movement, was built in 1942. It was sustained on a shoestring budget by the work of a few families, including my own and Uncle Mort’s.† We conducted our own services, occasionally borrowing a rabbi from nearby Florence. For the High Holidays each fall, we invited a student rabbi from the Jewish Theological Seminary in New York. Since my mother kept our home kosher, it generally fell to us to host him (always a him in those days). Thanks to Grandpa Friedman’s Hebrew lessons I was able to lead services by the time I was eleven and I was well prepared for my bar mitzvah at age thirteen.

Around the time of my bar mitzvah, I began to question religion. I would argue with my father about the conflicts between religion and science, for example, sometimes getting under his skin. The subject got mixed up in teenage rebellion. But I wasn’t much of a rebel, really, except for the long hair I sported as a high school junior and senior. My parents tried to expose me to Jewish life beyond Dillon, and I cooperated grudgingly. I spent some time at Jewish summer camps but disliked them intensely, not so much because they were Jewish but because I didn’t like the mild regimentation of camp life. At thirteen, I spent six weeks at Camp Ramah in New York, where, in theory, campers spoke only Hebrew (nobody actually did). I spent most of my time in the library studying baseball box scores. I had a better experience when, at fourteen, I participated in a six-week United Synagogue Youth bus tour around the country. I not only got my first opportunity to see some of the rest of the country outside the South, I attended my first Major League Baseball game, in St. Louis.

In Dillon, Jews were a small minority but not often the object of prejudice. The white community reserved that role largely for blacks. Still, I knew I was different. As a boy in elementary school I was asked on several occasions by other children, quite innocently, I believe, if I had horns. (The belief that Jews have horns apparently derives from a mistranslation from Hebrew of a verse in Exodus, compounded by a Michelangelo sculpture that portrays Moses with horns.) As I grew older, I became aware that many of my peers, evangelical Christians, believed as a matter of doctrine—if they thought about it—that I was condemned to eternal damnation.

Date: 2016-04-22; view: 638