ATLANTA–In remarks over the weekend Federal Reserve Chairman Ben Bernanke said it was regulatory failure and not lax monetary policy that led to the bursting of the housing bubble and the resulting deep recession.
Speaking to the American Economic Association meeting here, Bernanke said, “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.”
In response to critics who have argued that it was the Fed that contributed to the depth of the financial crisis by cutting interest rates from 2002-06, Bernanke, who was a member of the board of governors of the Federal Reserve System during that period, said rates were appropriate. The larger issue at play, Bernanke said, was a housing bubble that was driven by factors beyond monetary policy.
