Nobel Prize winners in economics include former Federal Reserve Chairman Ben Bernanke

Economist Jan Hassler of Stockholm University, who announced the prize, said it proved invaluable during their research. 2008 crisisThis brought the global financial system to the brink of collapse.

“The work of the laureates is critical to understanding the crisis,” said Mr. Hassler said. “The actions taken rest on the ideas we recognize today.”

Talking to the press, Mr. Diamond said that this award surprised him.

“I was sleeping very well and then suddenly, my cell phone went off,” he said.

Mr. The award for Bernanke cites a 1983 publication establishing bank failures as key to turning the Great Depression into the worst depression of the 20th century.

“At the time, it was a break from the current view,” said Mr. Hassler said. “Banks were failing, but that was seen as a consequence of the crisis rather than a cause of the crisis.”

A quiet academic who spent much of his career studying the Great Depression and central banking at Princeton University and the Stanford Graduate School of Business, Mr. Bernanke was at the forefront of policymaking as America began to reconsider the matter. Mastered from history books.

Mr. Trump is credited with averting economic disaster during and after the nearly two-year-long financial crisis that began in 2007 by quickly enacting aggressive new monetary policies–baseless interest rates, loans to banks and controversial bond-buying programs. Historians now give credit to Bernanke. .

“He’ll do whatever it takes” to stave off economic collapse became his mantra, and in many respects he did. Two years after the panic began, a recovery began Longest extension In American Economic History.

But a slow recovery and unpopular bank bailouts have left Mr. That made Bernanke a lightning rod for criticism, especially from within his own Republican Party.

Mr. Diamond and Mr. The award for Tybwick cited a 1983 paper that explained how banks play a key economic role by acting as intermediaries between savers and businesses through “maturity conversion.”

But Mr. Hassler said. Mr. Diamond’s additional work is that banks monitor borrowers on behalf of savers and have unique insight into businesses that can’t be quickly replaced by new ones if they collapse.

“When a bank fails, this knowledge disappears,” Mr. Hassler explained. “That’s why banking crises have long-term effects.”

Mr. Mr. Diamond said.

“A well-structured financial system is very vulnerable to the fear of fear,” he told a press conference at the University of Chicago. “Ben [Bernanke] His recommendations on policy absorbed that and I think central bankers in general have absorbed that lesson.

The 2008 financial crisis showed how essential and fragile banks are, said Gabrielle Sodoro-Reich, an economist at Harvard University.

In a 2014 thesis, Mr. Sodoro-Reich, Mr. on the Great Depression. Updating Bernanke’s research, he found that firms that borrowed from unhealthy lenders were less likely to hire and invest than firms stuck with healthy borrowers.

“Banks are important,” he said. “We can trace the impact of private banks on their borrowers and their private investments and employment and the things that matter in the real economy.”

with Interest rates are rising around the world, concerns about the resilience of banks and other financial institutions have revived in recent months. Late last month, the Bank of England The UK intervened in the market for government bonds To support the country’s pension fund.

Mr. Diamond said regulators are “much better prepared” for threats to financial stability than they were before 2008.

—David Harrison contributed to this article.

Write to Paul Hannon at [email protected]