Federal Reserve Chairman Ben Bernanke announced yesterday that the Federal Reserve will do more to focus on economic recovery, possibly buying up bad assets and providing more capital injections to banks. Bernanke also said that Fed could influence longer-term interest rates by informing the public’s expectations about the future course of monetary policy.
The Fed’s policy response to the crisis was a frequent topic of discussion at last month’s research symposium, “Preventing the Next Financial Crisis.” Floyd Norris ’83, chief financial correspondent for the New York Times, suggested that the crisis could have been tempered had the Fed used monetary policy to keep asset prices from spiraling out of control.
“I still don’t understand why no monetary response is appropriate when asset prices rise beyond reason, but immediate and sharp response is needed as soon as they fall. Basically, I think that economists have learned the lessons of the 1930s, but they have yet to learn the lessons of the 1920s,” said Norris, responding to the keynote address given by Professor Frederic Mishkin on the role of monetary policy in the current financial crisis.
Mr. Norris spoke as part of a panel with Matthew Bishop (The Economist), and Chrystia Freeland (The Financial Times) for the conference, which was held by the Sanford C. Bernstein & Co. Center for Leadership and Ethics.
To view full-length videos of conference presentations, please visit the conference Web site.