Ben S Bernanke: Remarks
Speech by Mr Ben S Bernanke, Chairman of the Board of Governors of the US Federal
Reserve System, at the President's Working Group Market Stability Initiative Announcement,
Washington DC, 14 October 2008.
* * *
Good morning. Before I begin, I want to express my appreciation of my colleagues, Secretary
Paulson and Chairman Bair, for their efforts in what has been an extraordinary collaboration.
As Americans well know, the challenges evident in the financial markets and in the economy
are large and complex, but I believe that the steps taken today will help us to overcome
them. Our strategy will continue to evolve and be refined as we adapt to new developments
and the inevitable setbacks. But we will not stand down until we have achieved our goals of
repairing and reforming our financial system and thereby restoring prosperity to our
economy.
Over the past year, the Federal Reserve has actively used all its powers and authorities to try
to help our economy through this difficult time. And central banks around the world have
consulted closely and cooperated in unprecedented ways to reduce strains in financial
markets and to bolster our economies. We will continue to do so. However, clearly the time
had come for a more comprehensive and broad-based solution.
History teaches us that government engagement in times of severe financial crisis often
arrives very late, usually at a point at which most financial institutions are insolvent or nearly
so. Waiting too long to act has usually led to much greater direct costs of the intervention
itself and, more importantly, magnified the painful effects of financial turmoil on households
and businesses. That is not the situation we face today. Fortunately, the Congress and the
Administration have acted at a time when the great majority of financial institutions, though
stressed by highly volatile and difficult market conditions, remain capable of fulfilling their
critical function of providing new credit for our economy. The Congress's prompt and decisive
action in passing the financial rescue legislation made possible the critical steps that have
been announced this morning. I also find it heartening that we are seeing not just a national,
but a global response to the crisis, commensurate with its global nature. Indeed, this past
weekend, the finance ministers and central bankers of the Group of Seven industrialized
countries announced a set of principles embodying a comprehensive approach to dealing
with the crisis. The steps we are taking today are fully consistent with those principles.
As in all past crises, at the root of the problem is a loss of confidence by investors and the
public in the strength of key financial institutions and markets, which has had cascading and
unwelcome effects on the availability of credit and the value of savings. The actions today
are aimed at restoring confidence in our institutions and markets and repairing their capacity
to meet the credit needs of American households and businesses. The voluntary equity
purchase program will strengthen financial institutions' capacity and willingness to lend. The
guarantee of the senior debt of all FDIC-insured depository institutions and their holding
companies will restore the confidence of these institutions' creditors and reinvigorate the
crucial inter-bank lending markets. Additionally, the Federal Reserve is pressing forward with
its facility to provide a broad backstop for the commercial paper market, so vital to the
functioning of our businesses.
Policymakers here and around the globe have taken a series of extraordinary steps.
Americans can be confident that every resource is being brought to bear: historical
understanding, technical expertise, economic analysis, and political leadership. I am not
suggesting the way forward will be easy. But I strongly believe that the application of these
tools, together with the underlying vitality and resilience of the American economy, will help
to restore confidence to our financial system and place our economy back on a path to
vigorous, healthy growth.