A Quote by Ben Bernanke
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.
Related Quotes
Efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment. As a result, I believe a macro-prudential approach to supervision and regulation needs to play the primary role.
Given the central role of effective, firmwide risk management in maintaining strong financial institutions, it is clear that supervisors must redouble their efforts to help organizations improve their risk-management practices...We are also considering the need for additional or revised supervisory guidance regarding various aspects of risk management, including further emphasis on the need for an enterprise-wide perspective when assessing risk.
Lenders, including major credit companies as well as payday lenders, have taken over the traditional role of the street-corner loan shark, charging the poor insanely high rates of interest.
The art of banking is always to balance the risk of a run with the reward of a profit. The tantalizing factor in the equation is that riskier borrowers pay higher interest rates. Ultimate safety - a strongbox full of currency - would avail the banker nothing. Maximum risk - a portfolio of loans to prospective bankrupts at usurious interest rates - would invite disaster. A good banker safely and profitably treads the middle ground.
Negative effects on the economy were covered up with a flood of liquidity from the Fed. That,plus lax regulation, led to a housing bubble, a consumption boom - but we were living on borrowed money. It was inevitable that there would be a day of reckoning, and it has now come. We will be paying the costs "with interest".
I've always believed that a speculative bubble need not lead to a recession, as long as interest rates are cut quickly enough to stimulate alternative investments. But I had to face the fact that speculative bubbles usually are followed by recessions. My excuse has been that this was because the policy makers moved too slowly - that central banks were typically too slow to cut interest rates in the face of a burst bubble, giving the downturn time to build up a lot of momentum.
If the entire world decided to become vegan tomorrow, a whole host of the world's problems would disappear overnight. Climate change would decrease by 25 percent, deforestation would cease, rainforests would be preserved, our water- and air-quality would increase, life-expectancy rates would increase, and our rates of cancer would plummet, so certainly, with that one action of becoming vegan you are quite effectively making the world a better place.
If you let interest rates be freed, be set by the free market, they would rise dramatically. There would be a lot of broken furniture on Wall Street. It needs to be broken. The back of the speculative bubble would be broken and we could slowly heal the financial system. That's what I think we need to do but it's never going to happen because there's trillions of asset values dependent on the Fed continuing to suppress, repress interest rates and shovel $85 billion a month of liquidity into the market.
I'm a firm believer of the venture capitalist-style approach to solving problems. Rather than doing many small things that you hope add up, it's much more effective to work on projects that are high risk and high reward.
Monetary policy has less room to maneuver when interest rates are close to zero, while expansionary fiscal policy is likely both more effective and less costly in terms of increased debt burden when interest rates are pinned at low levels.
We need open, competitive, market economies... but at the same time with effective regulation and supervision.
Good money management alone isn't going to increase your edge at all. If your system isn't any good, you're still going to lose money, no matter how effective your money management rules are. But if you have an approach that makes money, then money management can make the difference between success and failure.
A higher IOER rate encourages banks to raise the interest rates they charge, putting upward pressure on market interest rates regardless of the level of reserves in the banking sector. While adjusting the IOER rate is an effective way to move market interest rates when reserves are plentiful, federal funds have generally traded below this rate.
The fact that global savers accommodate U.S. consumers by keeping U.S. interest rates lower than they otherwise would be and the dollar stronger than it otherwise would be is simply a manifestation of America's comparative advantage at supplying wealth storage facilities.
I think the rise of quantitative econometrics and a highly mathematical approach to risk management was the obverse of a decline in interest in financial history.
There could be a 'community of communities' rather than a state. They would be united in some way but without any governing body. It would be made up of unions, credit unions instead of banks. There would be no more lending at interest. There would be no more money lenders.
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