Current Issue

Oct.13, 2010

Vol. 111, No. 2


Bernanke: Financial-crisis lessons

By Spencer Gaffney '12
Published in the October13, 2010, issue

Denise Applewhite/Office of Communications

Who’s responsible for the financial crisis that led to the Great Recession? There is plenty of blame to go around, Ben Bernanke, chairman of the Federal Reserve and former chairman of Princeton’s economics department, told a capacity crowd at Richardson Auditorium Sept. 24.

Part of the problem was the private sector’s failure to manage risk, Bernanke said, but regulatory systems also “placed insufficient emphasis on the detection of systemic risks.”

Much of the systemic risk in the 2008 financial crisis originated with the “too-big-to-fail” banks, Bernanke said. To safeguard stability and restore market discipline, he said, those firms must believe that the government will not step in to bail them out, and the key is creating a framework where institutions can fail without widespread collateral damage.

Bernanke stressed the importance of economic research, saying it has “proved invaluable to policymakers attempting to diagnose and respond to the financial crisis.” He urged more study of asset-price bubbles, market liquidity, and decision making during financial panics.
Post Comments
Tell us what you think about
Bernanke: Financial-crisis lessons
Enter the word as it appears in the picture below
By submitting a comment, you agree to PAW's comment posting policy.
CURRENT ISSUE: Oct.13, 2010
Web Bonus Links
Economics after the crisis
The text of a Sept. 24 campus lecture by Fed chairman Ben Bernanke, former chairman of Princeton's economics department, that focused on lessons learned and new directions for research.