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Fed Chairman Testifies on Causes of the Recent Financial and Economic Crisis

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Chairman Ben S. Bernanke, Causes of the Recent Financial and Economic Crisis Before the Financial Crisis Inquiry Commission, hearing, Too Big to Fail: Expectations and Impact of Extraordinary Government Intervention and the role of Systemic Risk in the Financial Crisis, Washington, D.C., September 2, 2010

  • “If the crisis has a single lesson, it is that the too-big-to-fail problem must be solved. Simple declarations that the government will not assist firms in the future, or restrictions that make providing assistance more difficult, will not be credible on their own. Few governments will accept devastating economic costs if a rescue can be conducted at a lesser cost; even if one Administration refrained from rescuing a large, complex firm, market participants would believe that others might not refrain in the future. Thus, a promise not to intervene in and of itself will not solve the problem.”
  • Via New Yorker, commentary on this testimony by John Cassidy, author of How Markets Fail: The Logic of Economic Calamities
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