Former U.S. Federal Reserve Chairman Paul Volcker on the current financial crisis
Former U.S. Federal Reserve Chairman Paul Volcker speaks in New York about practices leading to the current financial market crisis, the role of the Federal Reserve in preventing and dealing with such crises and the need for changes in market regulation.
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click for video
Excerpt:
Former Federal Reserve Chairman Paul Volcker questioned the central bank's decision to rescue Bear Stearns Cos. with a $29 billion loan, saying it was at "the very edge'' of its legal authority.
"The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles and practices,'' Volcker said in a speech to the Economic Club of New York.
Fed Chairman Ben S. Bernanke last month agreed to lend against Bear Stearns securities, paving the way for JPMorgan Chase & Co. to buy its Wall Street rival. Bernanke, who worked with Treasury Secretary Henry Paulson to broker the bailout, last week defended the move as necessary to prevent "severe'' damage to financial markets.
Volcker, the Fed chairman from 1979 to 1987, had implicit criticism for U.S. regulators and market participants who allowed "excesses of subprime mortgages'' to spread into ``the mother of all crises.'' The Fed's Bear Stearns loan was unusual, he said.
"What appears to be in substance a direct transfer of mortgage and mortgage-backed securities of questionable pedigree from an investment bank to the Federal Reserve seems to test the time-honored central bank mantra in time of crisis: lend freely at high rates against good collateral; test it to the point of no return,'' he said.
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Sources:
Volcker Says Fed's Bear Loan Stretches Legal Power
John Brinsley and Anthony Massucci
Bloomberg, April 8 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPDZWKWhz21c
Volcker Video
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vl8TvJRLodUg.asf
Tuesday, April 08, 2008 | 09:55 PM | Permalink
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The true greatest central banker blames the Fed for allowing the excesses that caused the "mother of all crises." Good enough for me. BTW if this is the mother of all crises, will it eclipse the Great Depression, as I have predicted?
Posted by: Steve Barry | Apr 8, 2008 10:19:27 PM
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