Federal Reserve Chairman Ben Bernanke on Tuesday outlined steps he thinks would help avert financial crises, saying the time for such a longer-term discussion has come even as policymakers address the worst crisis since the 1930s.
In remarks to the Council on Foreign Relations, Bernanke also issued a mea culpa of sorts for the current global financial crisis, speaking on behalf of the United States and some other big economies that failed to "prudently" invest the rush of capital inflows that started more than a decade ago.
"The responsibility to use the resulting capital inflows effectively fell primarily on the receiving countries, particularly the United States," Bernanke said. The "failure" of the this country and other big economies to do so "has led to a powerful reversal in investor sentiment and a seizing up of credit markets," he said.
Bernanke also said, "Governments around the world must continue to take forceful and, when appropriate, coordinated actions to restore financial market functioning and the flow of credit."
Assuming banks do stabilize, the United States should emerge from recession later this year and fairly strong growth should resume in 2010, Bernanke said. But he said things could potentially get much worse in U.S. labor markets even after the steep jump in the unemployment rate last month, to a 25-year high of 8.1%.