Former Federal Reserve Chairman Ben Bernanke appeared on CNBC with tremendous fanfare to promote his new book “The Courage to Act: A Memoir of a Crisis and Its Aftermath.”

Besides adding to the library of books spawned by the ongoing, permanent financial crisis, this book promises to revive the debate over the powers, policies, and actions of the Federal Reserve and of the other so-called financial regulators.

At the outset Bernanke appeared a bit dismayed by the headline in the Wall Street Journal – “How the Fed Saved the Economy,” and he protested that he had nothing to do with this headline. The panel, consisting of Becky Quick, Joe Kernan, Andrew Ross-Sorkin, and Steve Liesman, did not follow up with the obvious question – what about the title of your book?

They proceeded, however, to post a quote from one of the Fed’s critics, Stan Druckenmiller, who called the Fed’s monetary policy “the most extreme in the history of the world.” 

Bernanke dismissed this criticism and that of former Fed Governor Kevin Warsh that the sluggishness of the economy is due to Fed policy as calling for higher rates at the wrong time for the economy.

Benanke insisted that the Fed is delaying raising rates now because the 2% inflation target has not been achieved, and he agreed with the panel that the latest job and inflation numbers are “negative for the plan” for the Fed to raise interest rates by the end of the year.

By far the most interesting segments of the interview concerned the events of 2008 and the prospect that another round of bubbles could burst. When Liesman asked whether the Fed “missed the bubble” in 2008, Bernanke responded that the Fed “didn’t see the extent of the securitization panic.”

This begs the question, why not?

Others saw it, and Bernanke appeared at the time to be in strenuous denial that a bursting of this bubble could affect the larger economy.

Ross-Sorkin asserted that Bernanke’s explanation of why the authorities did not bail out Lehman Brothers “ends the debate.”

This writer disagrees, not because Lehman should have been bailed out, but because Bear Stearns should not have been bailed out, and the TBTF banks and securities firms should not have been bailed out.

One of the most provocative points Bernanke made, which is not news but cries out for investigation, is that these decisions were being made by the Federal Reserve Bank of New York.

This writer’s thesis is that lawyers for the TBTF banks that were at the center of the crisis were wagging the dog, and they were able to do this because none of the plethora of regulatory financial agencies, including the Treasury, did its job.

Repeatedly Bernanke referred to the need for “strong supervision” and stronger capital, along with a broader view of financial regulation, to forestall future crises, but the circumstance Bernanke repeatedly refers to, in which the entire US financial system had failed so badly that the global economy was threatened, could never had occurred if the Fed had done its supervisory job over a period of decades.

The Dodd-Frank Act has not fixed this but instead has created s complex system of regulatory coordination that is no substitute for – “The Courage to Act.”