It was less a clash of the titans and more a chat between old friends when Ben Bernanke and Timothy Geithner took the stage Tuesday to promote Bernanke's memoir, "The Courage to Act."
The former Federal Reserve chairman and former Treasury Department secretary appeared at a question-and-answer book talk at Barnes & Noble's Union Square store in New York. Many of the questions dealt with the financial crisis, so the night may have been a more pleasant experience for the audience than for Geithner and Bernanke.
"It brings back bad memories," Geithner joked at one point.
The initial shock of the financial crisis "was worse in 2008 than in 1929," Geithner said. But policymakers responded with solutions that worked, notably the implementation of higher capital requirements and stress testing, Bernanke said.
"Our banking system is way better capitalized now than it was before the crisis," Bernanke told the standing-room-only crowd. "If the banks had this much capital in 2007, we would have had a minor recession, a housing crash, but we would not have had the financial panic."
Some of those on hand Tuesday night disagreed that their response was a success. A few protesters vocalized their support for the National Emergency Employment Defense (NEED) Act, authored by former Rep. Dennis Kucinich in 2011. The legislation included provisions to create a ceiling on interest rates, form a monetary authority to shape monetary supply policy and replace Federal Reserve notes with U.S. money.
"We just want people to read this bill – this bill is better than Bernanke's book," Harrison Schultz, a digital strategist for Occupy the NEED Act and a doctoral student at The New School, told American Banker.
"It's completely self-congratulatory," Schultz said, commenting on Bernanke and Geithner's conversation. "The whole premise that they somehow prevented something from failing … is offensive."
The concept of "too big to fail" did, of course, come up in Bernanke and Geithner's chat. It's not time to break up the big banks, Bernanke said. But if it comes to that, Dodd-Frank provides the legal framework.
"People may not appreciate that the Dodd-Frank regulation authority has within it the power to break up the banks," Bernanke said. "The power is there, so I feel if you can't get to the point where you think 'too big to fail' is well controlled, it would not take more congressional action to do that."
A question about Glass-Steagall submitted from the audience drew a rousing response from Bernanke, who emphatically stated that he doesn't understand when people cite that law as a cause of the crisis.
"Deregulation was a mistake, but why Glass-Steagall is always the poster child of that, I don't really understand," Bernanke said. "Most of the firms that got in trouble were either investment banks or commercial banks. … It was more or less irrelevant to the crisis that we had."
Bernanke later noted that Glass-Steagall could have prevented elements of the government's coordinated response from coming to fruition. After all, he said, under Glass-Steagall, JPMorgan Chase could not have acquired Bear Stearns.
Geithner also had his colleague take a stab at explaining why interest rates remain low and whether they should have been raised by now. Bernanke contended that rates remain low because of slow growth in the economy, but cautioned against the need to raise them now.
"The best thing the Fed can do is to manage rates in a way that keeps the economy strong," he said. "While we understand why savers are upset about low interest rates, that's not necessarily a good reason for the Fed to change interest rates without a good economic justification."
Geithner threw Bernanke a couple of softball questions, asking him to weigh in on the New England Patriots' Tom Brady and the Deflategate scandal. Bernanke's response was that he agreed with the judge's decision. When asked whether he would have chosen fame, if he could do it all again, Bernanke said he would have picked fortune instead.
"Go for rich," he joked.