Bernanke Says that the Real Estate Bubble Triggered the Crisis, but Did Not Cause It
The president of the Federal Reserve (Fed) U.S., Ben Bernanke said today in New York that while the housing bubble helped set off the last financial crisis of 2008, was not the cause of it.
“If it is judged in relation to the size of financial markets, the aggregate exposure to subprime was quite modest,” said the head of the U.S. central bank at a conference on financial crisis organized by the Russell Sage foundations and The Century in New York.
Bernanke said that mortgage-related losses “subprime” were probably responsible for the “reaction mass” during the economic crisis “only insofar as they interacted with other factors, critical vulnerabilities, which served to amplify their effects.”
Among these “vulnerabilities,” the Fed chairman explained that was the need to capture short-term funds in wholesale markets, excessive leverage, too much risk management and the “holes and weaknesses” in regulatory oversight.
All this “created an environment that could generate a powerful panic and self-reinforcing,” said Bernanke, who despite these regulatory deficiencies defended the work of the central bank runs during the last crisis.
“The Federal Reserve’s response to failure or near failure of a number of firms critical to the system represented the best of the worst options, given the absence of a legal framework to reduce these firms in an orderly in the midst of crisis , a framework that now we have, “he added.
Bernanke, who did not address the current state of the U.S. economy or monetary policy measures of the central bank president, emphasized the importance of the Fed’s regulatory role to prevent future crises.
“Looking ahead, both for the Fed to other central banks, promoting financial stability should be on the same level as the management of monetary policy as the most critical priorities,” he said.
Category: Business News
