Earlier tonight I finished reading Too Big To Fail, Andrew Ross Sorkin's book on the financial crisis of late 2008 and early 2009. Overall I was very impressed with the level of detail; Sorkin certainly has his sources.
About midway through the book I was struck by the realization that Ben Bernanke apparently played an extremely minor role in resolving the crisis, despite his position as Fed Chairman. Rather, it was NY Fed President Tim Geithner who worked along with Treasury Secretary Hank Paulson to save the financial world. Bernanke, as portrayed by Sorkin, was often uninvolved and occasionally uninformed. I got the impression that, once the big decisions were made, Bernanke would be called in for the meetings with Wall Street or Congress to lend credibility by his mere presence.
On one hand, this makes some sense. Bernanke is an academic, and has no real experience dealing with Wall Street. (From experience, I can say that very few financial academics do know what really goes on in the financial world. In fact, many of their core theories can only function in an environment that I would charitably describe as "bizarro-world.") On the other hand, there may not be a single person alive who is more knowledgeable about economic depressions. Bernanke might not have known the intricacies of the banking sector, but he certainly knew the importance of keeping that sector afloat.
Ultimately, the massive panic that took down AIG and Lehman was financial, not economic. The difference is subtle but non-trivial. Further, many of the solutions devised by Paulson and Geithner were extremely time-sensitive. I knew Morgan Stanley and Goldman Sachs were in serious trouble, but I did not know that at one point they were literally hours away from demise. Geithner and Paulson were aware of this and needed to act. It's a credit to Bernanke that, presumably out of his depth, he was comfortable delegating enough responsibility to Geithner to allow him to save the system. Were a more politically-minded individual running the Fed, we might not be here today.