Friday, October 31, 2008
Chairman Ben S. Bernanke, Federal Reserve Board, spoke today at the UC Berkeley/UCLA Symposium: The Mortgage Meltdown, the Economy, and Public Policy, on The Future of Mortgage Finance in the United States. His conclusion:
Regardless of the organizational form, we must strive to design a housing financing system that ensures the successful funding and securitization of mortgages during times of financial stress but that does not create institutions that pose systemic risks to our financial markets and the economy. Government likely has a role to play in supporting mortgage securitization, at least during periods of high financial stress. But once government guarantees are involved, the problems of systemic risks and contingent taxpayer involvement must be dealt with clearly and credibly. Achieving the appropriate balance among these design challenges will be difficult, but it nevertheless must be high on the policy agenda for financial reform.