Bernanke: Housing Was Trigger Not Cause Of Crisis
Subprime mortgages and the housing bubble were the trigger while high leverage, unstable funding and deficient risk management and supervision were the vulnerabilities that led to the financial crisis, Federal Reserve Chairman Ben Bernanke said Friday. Bernanke, speaking in New York at a conference about perspectives of the crisis, didn't address monetary policy, either from a historic or current perspective. "In the case of dot-com stocks, losses were spread relatively widely across many types of investors. In contrast, following the housing and mortgage bust, losses were felt disproportionately at key nodes of the financial system, notably highly leveraged banks, broker-dealers, and securitization vehicles," Bernanke said. "Some of these entities were forced to engage in rapid asset sales at fire-sale prices, which undermined confidence in counterparties exposed to these assets, led to sharp withdrawals of funding, and disrupted financial intermediation, with severe consequences for the economy."
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