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Wan LixinOpinion deputy editor of Shanghai Daily
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Bernanke's big picture lesson
By Jeannine Aversa |
July 28, 2009, Tuesday
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Print Edition
Print Edition
FEDERAL Reserve Chairman Ben Bernanke said on Sunday that he had to "hold my nose" over last year's taxpayer-financed bailouts of big financial companies but argued that the action had to be taken to avoid a major meltdown of the United States financial system and the broader economy.
Bernanke's comments came during a town-hall style meeting in Kansas City, Missouri, where he was peppered with several questions about government decisions last year to rescue so-called "too big to fail companies" like insurance giant American International Group, whose collapse would have wreaked havoc on the global economy.
A small-business owner complained to Bernanke that such actions were "hard to swallow," saying he felt like small businesses - also struggling to survive the recession and all the financial fallout - were being shortchanged.
"Nothing made me more frustrated, more angry, than having to intervene" when companies were "taking wild bets," Bernanke said. But not acting would have had grave consequences for the economy, he added.
"I was not going to be the Federal Reserve chairman who presided over the second Great Depression," he said. "I had to hold my nose. ... I'm as disgusted as you are. ... I absolutely understand your frustration."
At the height of the financial crisis last fall, Bernanke recalled spending nights on the sofa in his office. It was a "perfect storm," he said, where housing, credit and financial problems converged into a major crisis the likes of which haven't been seen since the 1930s. To deal with the crisis, Bernanke said he sometimes had to do things "outside the box."
The financial crisis underscores the need for Congress to enact legislation that will create a government mechanism for safely unwinding big financial companies, along the lines of the process used by the Federal Deposit Insurance Corp to handle failing banks, Bernanke said.
When asked about the Fed's diligence in protecting consumers, Bernanke acknowledged that "we were late in addressing the subprime lending problem," referring to the risky mortgages and dubious lending practices that powered the housing boom and contributed to its crash. "We have to take some heat for that."
Still, Bernanke made the case - as he did last week on Capitol Hill - that consumer protection oversight should stay with the Fed. An Obama administration proposal would create a new consumer protection agency overseeing mortgage, credit cards and other financial products, stripping the Fed of some of its duties.
Bernanke's comments came during a town-hall style meeting in Kansas City, Missouri, where he was peppered with several questions about government decisions last year to rescue so-called "too big to fail companies" like insurance giant American International Group, whose collapse would have wreaked havoc on the global economy.
A small-business owner complained to Bernanke that such actions were "hard to swallow," saying he felt like small businesses - also struggling to survive the recession and all the financial fallout - were being shortchanged.
"Nothing made me more frustrated, more angry, than having to intervene" when companies were "taking wild bets," Bernanke said. But not acting would have had grave consequences for the economy, he added.
"I was not going to be the Federal Reserve chairman who presided over the second Great Depression," he said. "I had to hold my nose. ... I'm as disgusted as you are. ... I absolutely understand your frustration."
At the height of the financial crisis last fall, Bernanke recalled spending nights on the sofa in his office. It was a "perfect storm," he said, where housing, credit and financial problems converged into a major crisis the likes of which haven't been seen since the 1930s. To deal with the crisis, Bernanke said he sometimes had to do things "outside the box."
The financial crisis underscores the need for Congress to enact legislation that will create a government mechanism for safely unwinding big financial companies, along the lines of the process used by the Federal Deposit Insurance Corp to handle failing banks, Bernanke said.
When asked about the Fed's diligence in protecting consumers, Bernanke acknowledged that "we were late in addressing the subprime lending problem," referring to the risky mortgages and dubious lending practices that powered the housing boom and contributed to its crash. "We have to take some heat for that."
Still, Bernanke made the case - as he did last week on Capitol Hill - that consumer protection oversight should stay with the Fed. An Obama administration proposal would create a new consumer protection agency overseeing mortgage, credit cards and other financial products, stripping the Fed of some of its duties.
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