Bernanke: Blame it on lax regulation
TEXT OF INTERVIEW
Steve Chiotakis: He’s been in the hot seat for some of the measures his board took to contain the financial crisis. But Federal Reserve Chairman Ben Bernanke has defended low interest rates against critics who say they helped fuel the housing bubble. Speaking to a meeting of economists yesterday, the Fed chairman said the problem may not have been interest rates. Marketplace’s Nancy Marshall-Genzer is with us live this morning from Washington with that. Good morning, Nancy.
Nancy Marshall Genzer: Good Morning.
Chiotakis: So why does Mr. Bernanke think that low interest rates aren’t to blame?
Marshall Genzer: Well, he says other countries with super low interest rates didn’t have a housing bubble. And he says the real problem in the U.S. was lax regulation by the Fed and other banking regulators.
Ben Bernanke: Stronger regulation and supervision aimed at problems with underwriting practices and lenders’ risk management would have been a more effective and surgical approach for constraining the housing bubble than a general increase in interest rates.
Chiotakis: So Nancy, is Ben Bernanke saying interest rates don’t work at all in these situations?
Marshall Genzer: Well, not exactly. In fact in his speech yesterday, he said the Fed must be especially vigilant in heading off future housing bubbles. He said the first option would be regulation, but he said the Fed also
needs to “remain open” to the possibility of higher interest rates to avoid or even pop future bubbles.
Chiotakis: And did the Fed Chairman say much about where interest rates are headed now?
Marshall Genzer: Not directly. As I mentioned, he did say the Fed needs to “remain open” to higher interest rates, but most analysts don’t expect the Fed to increase rates until the middle of this year, at the earliest.
Chiotakis: All right. Marketplace’s Nancy Marshall Genzer, joining us from Washington. Nancy, thanks.
Marshall Genzer: You’re welcome.
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