Ben Bernanke, Federal Reserve Chairman, defended his record during the economic crisis and highlighted the importance of regulating the economy to ensure stability in a speech in New York Friday.
The chairman said that the financial crisis originated from fundamental breakdowns in both markets and regulation, which left the Federal Reserve only the option to lower interest rates.
Bernanke urged increased viligence and care, particularly during a period of low interest rates.
In his speech, he compared the current crisis to the dot-com bubble in the late 1990s, saying the latter destroyed more wealth but was spread more evenly within the economy.
In contrast, the 2008 crisis was concentrated in the financial industry and a few institutions, which have been called "too big to fail."
“Any theory of the crisis that ties its magnitude to the size of the housing bust must also explain why the fall of dot-com stock prices just a few years earlier, which destroyed as much or more paper wealth — more than $8 trillion — resulted in a relatively short and mild recession and no major financial instability,” Bernanke said, according to Forbes.
“The events of the past few years have forcibly reminded us of the damage that severe financial crises can cause,” Bernanke said in his speech, according to Bloomberg.
“Going forward, for the Federal Reserve as well as other central banks, the promotion of financial stability must be on an equal footing with the management of monetary policy as the most critical policy priorities.”
According to CNN, Bernanke defended the role of the Federal Reserve under his predecessor, Alan Greenspan, whose policies have been linked to the housing crisis.
"It's a very contested topic," Bernanke said.
"But my reading of the research literature is so far that the evidence that monetary policy was a major source of the housing crisis is pretty weak at this point."