As we try to make the financial system safer, we must inevitably confront the problem of moral hazard.
When the economic well-being of their nation demanded a strong and creative response, my colleagues at the Federal Reserve... mustered the moral courage to do what was necessary.
No economy can succeed without a high-quality workforce, particularly in an age of globalization and technical change.
There are limits to monetary policy.
One would be forgiven for concluding that the assumed benefits of financial innovation are not all they were cracked up to be.
In a slow-growing world that is short on aggregate demand, Germany's trade surplus is a problem.
Uncertainty is seen to retard investment independently of considerations of risk or expected return.
The financial crisis that began in the summer of 2007 was an extraordinarily complex event with multiple causes.
A gold standard doesn't imply stability in the prices of the goods and services that people buy every day, it implies a stability in the price of gold itself.
The Federal Reserve has always recognized the importance of allowing markets to work, and government oversight of financial firms will never be fully effective without the aid of strong market discipline.
Investment banks manage to go bankrupt through their investment-banking activities, commercial banks manage to go bankrupt through their commercial-banking activities.
If two people always agree, one of them is redundant.
The American people are among the most productive in the world. We have the best technologies. We have great universities. We have entrepreneurs.
The Depression was an incredibly dramatic episode - an era of stock-market crashes, breadlines, bank runs and wild currency speculation, with the storm clouds of war gathering ominously in the background... For my money, few periods are so replete with human interest.
Well, optimism's a good thing. It - makes people go out and - you know, start businesses and spend and do whatever is necessary to get the economy going.
I would argue that no financial instrument counted as regulatory capital should be allowed to receive any protection from losses.
I don't know why there aren't more Depression buffs.
In the future, financial firms of any type whose failure would pose a systemic risk must accept especially close regulatory scrutiny of their risk-taking.
The decline in home equity makes it more difficult for struggling homeowners to refinance and reduces the financial incentive of stressed borrowers to remain in their homes.
Many foreclosed homes are neglected or abandoned, as legal proceedings or other factors delay their resale. Deteriorating or vacant properties can, in turn, directly affect the quality of life in a neighborhood, for example, by leading to increases in vandalism or crime.
Market discipline can only limit moral hazard to the extent that debt and equity holders believe that, in the event of distress, they will bear costs.
Indeed, in general, healthy investment returns cannot be sustained in a weak economy, and of course it is difficult to save for retirement or other goals without the income from a job.
The Federal Reserve Act requires the Federal Reserve to report annually on its operations and to publish its balance sheet weekly.
The role of liquidity in systemic events provides yet another reason why, in the future, a more system wide or macroprudential approach to regulation is needed.
In the typical economic recovery, a resurgent housing sector helps fuel reemployment and rising incomes.
I assure this committee that, if I am confirmed, I will be strictly independent of all political influences... essential to that institution's ability to function effectively and achieve its mandated objectives.
The Federal Reserve's job is to do the right thing, to take the long-run interest of the economy to heart, and that sometimes means being unpopular. But we have to do the right thing.
The banks have accounts with the Fed, much the same way that you have an account in a commercial bank.
Our mission, as set forth by the Congress is a critical one: to preserve price stability, to foster maximum sustainable growth in output and employment, and to promote a stable and efficient financial system that serves all Americans well and fairly.
A little humility never hurts.
Low and stable inflation in many countries is an important accomplishment that will continue to bring significant benefits.
Fostering transparency and accountability at the Federal Reserve was one of my principal objectives when I became Chairman in February 2006.
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.
Certainly, 9 percent unemployment and very slow growth is not a good situation.
Many savers are also homeowners; indeed, a family's home may be its most important financial asset. Many savers are working, or would like to be.
You want to put the fire out first and then worry about the fire code.
Obviously, I haven't succeeded in defusing the political concerns about the Fed.
Deflation can be particularly dangerous when a financial system is shaky, with household and corporate balance sheets in poor shape and banks undercapitalized and heavily burdened with bad loans.
The crisis and recession have led to very low interest rates, it is true, but these events have also destroyed jobs, hamstrung economic growth and led to sharp declines in the values of many homes and businesses.
It's true that the Federal Reserve faces a lot of political pressure and is unpopular in many circles.
No one will lend at a negative interest rate; potential creditors will simply choose to hold cash, which pays zero nominal interest.
Given the extent of the exposures of major banks around the world to A.I.G., and in light of the extreme fragility of the system, there was a significant risk that A.I.G.'s failure could have sparked a global banking panic.
How much would you pay to avoid a second Depression?
My proposal that Fed governors should signal their commitment to public service by wearing Hawaiian shirts and Bermuda shorts has so far gone unheeded.
I was a professor at Princeton University. And, in that capacity, I studied for many years the role of financial crisis in the economy.
I and others were mistaken early on in saying that the subprime crisis would be contained. The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict.
Among other objectives, liquidity guidelines must take into account the risks that inadequate liquidity planning by major financial firms pose for the broader financial system, and they must ensure that these firms do not become excessively reliant on liquidity support from the central bank.
The stress on the financial system in the fall of 2007 was significant, but not so significant as to threaten the overall stability of the U.S. economy, although it did lead to the beginning of a recession at the end of 2007.
Of course, economic forecasts must be revised when new information arrives and are thus necessarily provisional.
