In a speech yesterday, Fed Chairman Ben Bernanke insisted that low interest rates were not the root cause of the most recent real estate bubble. The New York Times says he used his "strongest language yet" in defending the central bank's past decisions and emphasizing the importance of greater financial regulation moving forward. Bernanke said, "Stronger regulation and supervision aimed at problems with underwriting practices and lenders' risk management would have been a more effective and surgical approach to constraining the housing bubble than a general increase in interest rates." The Wall Street Journal notes that Bernanke's views on how the Fed should handle bubbles have changed. Previously, the paper says, "Its bubble strategy was to mop up after a bubble burst with lower interest rates to prevent damage to the broader economy." Recently, though, "Bernanke said, `never say never,' when asked whether the Fed should instead use higher interest rates to pre-emptively prick future bubbles, and he later said he wouldn't rule it out."
The Pope is considered to be infallible. Apparently, those who hold the title of Federal Reserve chairman want to be viewed that way as well. Fed chair Ben Bernanke defends the decision by his predecessor Alan Greenspan to keep interest rates super low following the 2001 recession, saying that the Fed's monetary policies were not the cause of the housing bubble.
Fed chair Ben Bernanke defends the decision by his predecessor Alan Greenspan to keep interest rates super low following the 2001 recession, saying that the Fed's monetary policies were not the cause of the housing bubble.
