Bernanke: Forestalling Crisis Is Biggest Regret

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Sept. 18 (Bloomberg) -- Federal Reserve Chairman Ben Bernanke discusses the financial crisis that began five years ago. (Source: Bloomberg)

What appropriate measures in place to avoid another deep financial crisis?

On regrets, i have many.

I think, recently be biggest -- the biggest regret that i have is we did not forestall the crisis.

Once the crisis got going, it was extraordinary difficult to prevent.

I think we did what we could given the powers that we had.

I would agree with hank that we were motivated entirely by the interests of the broader public, that our goal was to stabilize the financial system so it would not bring the economy down, so that it would not create massive unemployment and economic hardship that was even worse, that would have been even more severe by many times than what we actually saw.

So, i agree with him on that.

Since you gave me the opportunity, i would mention, of course, all the money used in those operations has been paid back with interest.

So, it has not been a cost even from a physical point of view.

In terms of progress -- that is a good question.

I think we made a lot of good progress.

We had of course the dodd frank law passed in 2010. we recently came to an agreement internationally on a group of measures, agreements relating to the shadow banking system and other aspects of the financial system.

I think that today our large financial firms, for example, are better capitalized by far than they were certainly during the crisis and even before the crisis.

Supervision is tougher.

We do stress testing to ensure that firms can withstand not only normal shocks, but very large shocks, similar to those experienced in 2008. and very importantly we have a tool we did not have in 2008 which i think would have made a significant difference, and that is the liquidation authority the dodd-frank bill gave to the fdic.

The fdic with other agencies have the ability to wind down a failing financial firm in a way that minimizes the direct impact on the financial markets and the economy.

I should say -- i do not want to overstate the case.

I think there is a lot to be done in the case of resolution regimes, for example.

The united states has set the course, internationally.

Other bodies are setting up standards for resolution regimes that are very similar to those in the united states which will make for better cooperation across borders.

We are still some distance from being fully geared up with our foreign counterparts to successfully winding down a multinational firm.

We made progress in that direction, but we need to do more, i think.

I think there is more to be done.

More to be done on derivatives.

A law has been done to make them more transparent and safer.

It probably will be some time before all of this stuff that has been undertaken, all of these measures are fully implemented and we can assess the ultimate impact on the financial system.

This text has been automatically generated. It may not be 100% accurate.


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