Section I 1. Summarize key points of each speaker on the causes and handling of the Great Recession, in particular their views on the FED actions during the crisis
Ben Bernanke, former chairman of the Federal Reserve Board.
Ben Bernanke points that the key triggers of the crisis were decline in house prices and the associated mortgage losses and that the effects of them were amplified by vulnerabilities in the economy and financial system.
He allocates such private vulnerabilities: * Borrowers and lenders took on too much debt * Banks and other financial institutions failed to adequately monitor and manage the risks they were taking * Firms relied on short term funding such as commercial paper * The increased use of exotic financial instruments concentrated risk
Public sector vulnerabilities: * Gaps in regulatory structure * Supervision of banks and bank holding companies (FED did not press hard enough on the issue of measuring a risk) and many banks did not have a capacity to understand the risk, they were taking, and supervisors should press them harder to develop the capacity. * There were failures in the regulation of the customer protection * Individual agencies looked at different parts of the business and nobody was really in charge in looking to see whether there was problems related to the overall financial system * Fannie Mae and Freddie mac that were operating with an inadequate capital to back their guaranties. Their balance sheets grew rapidly exposing them to additional risk. * Bad mortgage products and practices such as non-doc loans repayment of which depended on continually rising prices of houses. When house prices stopped rising borrowers could not neither refinance nor meet the payments on the exotic mortgages. * Subprime mortgage securitization that imposed loses on financial firms when