Ben Bernanke Quotes

A banker who is allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it if the civilization doesn't have rules that prevent it.

Soon after the financial crisis of 2008, I was at a meeting in Washington with a group of U.S. senators. They had invited me to provide a point of view on new regulation; regulation aimed at ensuring we never have to go through the events of 2008 ever again.

Debt, we've learned, is the match that lights the fire of every crisis. Every crisis has its own set of villains - pick your favorite: bankers, regulators, central bankers, politicians, overzealous consumers, credit rating agencies - but all require one similar ingredient to create a true crisis: too much leverage.

The Commission concludes that the banking supervisors failed to adequately and proactively identify and police the weaknesses of the banks and thrifts or their poor corporate governance and risk management, often maintaining satisfactory ratings on institutions until just before their collapse. This failure was caused by many factors, including beliefs that regulation was unduly burdensome, that financial institutions were capable of self-regulation, and that regulators should not interfere with activities reported as profitable.

… there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people's money

To be sure, booms and busts will come and go. But their severity can vary dramatically based on the policies in place to prevent them. With stronger regulations, neither the housing and derivatives bubbles nor the eventual crash would have been so bad.

I had begun to worry about the housing market back in 2003, when lenders first resurrected interest-only mortgages, loosening their credit standards to generate a greater volume of loans. Throughout 2004, I had watched as these mortgages were offered to more and more subprime borrowers - those with the weakest credit.

In June 2005, mortgage rates were at 40-year lows, and risk premiums on mortgage securities were at all-time lows. Once the banks migrated to the subprime area, there was little else that could be done to send housing prices higher.

The Federal Reserve has a responsibility to ensure the safety and soundness of financial institutions and to contain systemic risks in financial markets.

Regulation is necessary, particularly in a sector, like the banking sector, which exposes countries and people to a risk.

The Federal Reserve has always recognized the importance of allowing markets to work, and government oversight of financial firms will never be fully effective without the aid of strong market discipline.

Banks hold deposits and savings entrusted to them by individuals, by businesses, by governments and by central banks. They put that money to work, helping people to buy homes, for example, or lending to businesses to invest in expansion.

Banks need to continue to lend to creditworthy borrowers to earn a profit and remain strong.

You can design a mortgage system that is different without a Fannie and Freddie, but there are principles you have to have, to have a good system.

It's true that monetary policy was too lax for too long, and the government encouraged lending to people who were unlikely to repay their loans.

Investors should be cautiously positioned as the global economy and markets face major uncertainties. The downgrade will be a further headwind to growth and job creation in the U.S.

If you are in banking and lending, surprise outcomes are likely to be negative for you.

Banking, I would argue, is the most heavily regulated industry in the world. Regulations don't solve things. Supervision solves things.

In the economy of the cuckoo people that populate central banks, everything is possible. What you have is gigantic bubbles, the NASDAQ in 2000, then the housing bubble and then commodities in 2008 when oil went from $78 to $147 before plunging to $32 within six months.

Fannie and Freddie made two-thirds of all subprime mortgages. That is not a free market institution. That entity, along with the Fed printing too much money back in '03 and '04, caused the housing collapse. So we need to take free markets seriously. That means we have to put an end to all these tax credits and tax deductions and loopholes.

If there had been a Financial Product Safety Commission in place 10 years ago, the current financial crisis would have been averted.

They not only deregulated. They desupervised.

If the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten per cent. the greater part of the money which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give this high interest. Sober people, who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it. Where the legal interest, on the contrary, is fixed but a very little above the lowest market rate, sober people are universally preferred as borrowers, to prodigals and projectors. The person who lends money, gets nearly as much interest from the former, as he dares to take from the latter, and his money is much safer in the hands of the one set of people than in those of the other.

When all things are considered, it will be found best for the Nation to leave the Borrowers and the Lender to make their own Bargains, according to the Circumstances they lie under

Banks lend by creating credit. They create the means of payment out of nothing