TEXT-Fed's Bernanke speech to Economic Club of Washington
Conclusion In closing, I will again note that in the fall of last year, the United States, indeed the world, confronted a financial crisis of a magnitude unseen for generations. Concerted actions by the Federal Reserve and other policymakers here and abroad helped avoid the worst outcomes. Nevertheless, the turmoil dealt a severe blow to our economy from which we have only recently begun to recover. The improvement in financial conditions this year and the resumption of growth over the summer offer the hope and expectation of continued recovery in the new year. However, significant headwinds remain, including tight credit conditions and a weak job market. The Federal Reserve has been aggressive in its efforts to stabilize our financial system and to support economic activity. At some point, however, we will need to unwind our accommodative policies in order to avoid higher inflation in the future. I am confident we have both the tools and the commitment to make that adjustment when it is needed and in a manner consistent with our mandate to foster employment and price stability. In the meantime, financial firms must do a better job of managing the risks of their business, regulators--the Federal Reserve included--must complete a thoroughgoing overhaul of their approach to supervision, and the Congress should move forward in making needed changes to our system of financial regulation to avoid a similar crisis in the future. In particular, we must solve the problem of "too big to fail." In sum, we have come a long way from the darkest period of the crisis, but we have some distance yet to go. In the midst of some of the toughest days, in October 2008, I said in a speech that I was confident that the American economy, with its great intrinsic vitality, would emerge from that period with renewed vigor.(8) I remain equally confident today. FOOTNOTES: (1) For more discussion, see Ben S. Bernanke (2009), "On the Outlook for the Economy and Policy," speech delivered at the Economic Club of New York, New York, N.Y., November 16, www.federalreserve.gov/newsevents/speech/bernanke20091116a.htm. (2) The three-month diffusion index for manufacturing--a measure of the breadth of production changes across industry categories--stood at 63.8 percent in September. See Board of Governors of the Federal Reserve System (2009), Statistical Release G.17, "Industrial Production and Capacity Utilization," Table 6: Diffusion Indexes of Industrial Production (November 17), www.federalreserve.gov/releases/g17/Current/table6.txt. (3) See Ben S. Bernanke (2009), "Reflections on a Year of Crisis," speech delivered at "Financial Stability and Macroeconomic Policy," a symposium sponsored by the Federal Reserve Bank of Kansas City, held in Jackson Hole, Wyo., August 20-22, www.federalreserve.gov/newsevents/speech/bernanke20090821a.htm. (4) See Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Office of Thrift Supervision (2008), "Interagency Statement on Meeting the Needs of Creditworthy Borrowers," joint press release, November 12, www.federalreserve.gov/newsevents/press/bcreg/20081112a.htm; and Board of Governors of the Federal Reserve System (2009), "Federal Reserve Adopts Policy Statement Supporting Prudent Commercial Real Estate (CRE) Loan Workouts," press release, October 30, www.federalreserve.gov/newsevents/press/bcreg/20091030a.htm. (5) See Board of Governors of the Federal Reserve System (2009), "Federal Reserve, OCC, and FDIC Release Results of the Supervisory Capital Assessment Program," press release, May 7, www.federalreserve.gov/newsevents/press/bcreg/20090507a.htm; and Board of Governors of the Federal Reserve System (2009), "Federal Reserve Board Makes Announcement Regarding the Supervisory Capital Assessment Program (SCAP)," press release, November 9, www.federalreserve.gov/newsevents/press/bcreg/20091109a.htm. (6) See Ben S. Bernanke (2009), "The Federal Reserve's Balance Sheet: An Update," speech delivered at the Federal Reserve Board Conference on Key Developments in Monetary Policy, Washington, October 8, www.federalreserve.gov/newsevents/speech/bernanke20091008a.htm; and Ben S. Bernanke (2009), "The Fed's Exit Strategy," Opinion, Wall Street Journal, July 21, here. (7) See Ben S. Bernanke (2009), "Financial Regulation and Supervision after the Crisis: The Role of the Federal Reserve," speech delivered at the Federal Reserve Bank of Boston 54th Economic Conference, held in Chatham, Mass., October 23, www.federalreserve.gov/newsevents/speech/bernanke20091023a.htm. (8) See Ben S. Bernanke (2008), "Stabilizing the Financial Markets and the Economy," speech delivered at the Economic Club of New York, New York, N.Y., October 15, www.federalreserve.gov/newsevents/speech/bernanke20081015a.htm. (Washington newsroom; 202-898-8310)
DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.