– risky? there is a real debate on this subject... i encourage all of our critics to take a few moments, a few seconds, to consider what things would be like now if we hadn ’ t done what we did. if the ecb hadn ’ t taken the measures it has taken in recent years, there would be no growth in the euro area. inflation, according to our calculations, for what they are worth, using models developed by ecb economists, would be half a point weaker, i. e. it would be negative, with all the risks of a deflationary spiral that that entails. thus, the alternative scenario is frankly not very attractive. monetary policy has helped to boost growth in the euro area. of course, it is not enough. you need reforms, you need productivity, you need projects to finance. we can make the financing of projects more attractive but then there have to be projects to finance. it ’ s up to firms and the member states to take care of that. but without the impetus provided by monetary policy, growth would not have picked up. behind your question, there is the issue of possible risks to financial stability... yes, the risks of bubbles.... well, we can ’ t see these bubbles. there are no credit bubbles in the euro area. moreover, the banking sector continues to shrink in the euro area, and for good reason : the size of the banks had become excessive. there is no overvaluation of assets, for example, on the stock and property markets, on average, in the euro area. there may be small bubbles, some simmering in certain segments of the markets, but that is for the national authorities to deal with. but there is no financial stability problem in the euro area today. we are vigilant, we will continue to keep a close eye on developments, but at the moment the assessment is clearly positive. bis central bankers ’ speeches

and bankers, have an incentive to undertake careful underwriting. second, because the pools of assets underlying mortgage - backed securities have highly correlated risks, including interest rate, prepayment, and credit risks, the see kenneth snowden ( 1995 ), " mortgage securitization in the united states : twentieth century developments in historical perspective, " in michael d. bordo and richard sylla, eds., anglo - american financial systems : institutions and markets in the twentieth century ( new york : mcgraw - hill ). institutions and other investors that hold these securities must have the capacity to manage their risks carefully. finally, because mortgage - backed securities are complex amalgamations of underlying mortgages that may themselves be complex to price, transparency about both the underlying assets and the mortgage - backed security itself is essential. during the early phases of the development of the subprime mortgage market, most lenders and investors followed these principles. investors readily understood the simple senior / subordinated structure, and substantial useful information was provided about the subprime pools. however, during the credit boom period in the united states, worldwide demand for assets of perceived high quality became intense. incentives to properly underwrite and evaluate new mortgage credit weakened, and many investors became overreliant on credit ratings. to meet investor demand for customized products, the securities became increasingly complex. although highly sophisticated methods for sharing risk were developed, not enough attention was paid to the risk that housing markets might turn down sharply across a range of geographical areas. the rapid rise in early payment defaults in the fall of 2006 signaled that something had gone wrong. as investors lost confidence, significant flaws in the securitization process, including inadequate risk management and disclosure as well as excessive complexity, became apparent. perhaps the recent mortgage cycle will be remembered as just another failed episode of financial innovation. but one feature that makes it different from previous episodes was the relative success of government - sponsored securitization. fannie mae and freddie mac continued to produce and sell significant quantities of mortgage - backed securities to secondary - market investors throughout the period of turmoil. their ability to continue to securitize when private firms could not did not appear to result from superior business models or management. instead, investors remained willing to accept gse mortgage - backed securities because they continued to believe that the government stood behind them. that experience suggests that, at least under the most stressed conditions, some form of government backstop may be necessary to ensure continued securi