How to prevent another financial and real estate market calamity like the one we're still feeling the effects of? Federal Reserve Board Chairman Ben Bernanke favors strengthening regulations to prevent such a bubble from inflating again.
Failing that, increasing interest rates - in advance of a problem - might be necessary, in his opinion.
Quoted in today's Wall Street Journal by Reporter Luca Di Leo, Bernanke's comments to the American Economic Association's Annual Meeting in Atlanta suggest using "monetary policy" as a fall back tool for addressing bloated or overheated financial markets.
Many economic experts have criticized the Fed for keeping rates too low a decade ago, thus fueling the housing bubble which began to pop in 2006 here in Chicago. Bernanke did not go as far as blaming this early-2000 monetary and rate policy as the sole blame for the real estate and credit crisis. He also blamed lax regulation and exotic, high-leverage financing and its availability to those who likely should not have received it.
Recent Fed Policy has been generally reactive - reducing interest rates to stimulate the market, and help ensure a soft landing for for a sluggish housing market, once visible problems occur. Bernanke now proposes a more proactive approach, one involving creativity and flexibility before financial markets fall.
Please read our post today via BlogChicagoHomes.com.
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