I was a professor at Princeton University. And, in that capacity, I studied for many years the role of financial crisis in the economy.
The financial crisis that began in the summer of 2007 was an extraordinarily complex event with multiple causes.
Developments in financial markets can have broad economic effects felt by many outside the markets.
Well, the U.S., of course, is the world's largest economy. It's about a quarter of the world's output. It's also home to many of the largest financial institutions and financial markets.
Our mission, as set forth by the Congress is a critical one: to preserve price stability, to foster maximum sustainable growth in output and employment, and to promote a stable and efficient financial system that serves all Americans well and fairly.
The stress on the financial system in the fall of 2007 was significant, but not so significant as to threaten the overall stability of the U.S. economy, although it did lead to the beginning of a recession at the end of 2007.
Because financially capable consumers ultimately contribute to a stable economic and financial system as well as improve their own financial situations, it's clear that the Federal Reserve has a significant stake in financial education.
The Libor system is structurally flawed. It is a major problem for our financial system and for the confidence in the financial system. We need to address it.
Our financial system is so complicated and so interactive - so many different markets in different countries and so many sets of rules.
As we try to make the financial system safer, we must inevitably confront the problem of moral hazard.
Of course, economic forecasts must be revised when new information arrives and are thus necessarily provisional.
Given the extent of the exposures of major banks around the world to A.I.G., and in light of the extreme fragility of the system, there was a significant risk that A.I.G.'s failure could have sparked a global banking panic.
I think one of the lessons of the Depression - and this is something that Franklin Roosevelt demonstrated - was that when orthodoxy fails, then you need to try new things. And he was very willing to try unorthodox approaches when the orthodox approach had shown that it was not adequate.
I came home from school one day, and there was a phone call for me. And I picked up the phone. They said, 'This is the Harvard Admissions Department. We'd like to let you know that you're accepted in the freshman class.' And I said, 'Come on, who is this really?'
Economic science concerns itself primarily with theoretical and empirical generalizations about the behavior of individuals, institutions, markets, and national economies. Most academic research falls in this category.
A gold standard doesn't imply stability in the prices of the goods and services that people buy every day, it implies a stability in the price of gold itself.
Every effort needs to be made to try and offset the costs of Katrina and Rita by reductions in other government programs, especially those that are wasteful, duplicative and ineffective.
My proposal that Fed governors should signal their commitment to public service by wearing Hawaiian shirts and Bermuda shorts has so far gone unheeded.
Market discipline can only limit moral hazard to the extent that debt and equity holders believe that, in the event of distress, they will bear costs.
The biggest downside of my current job is that I have to wear a suit to work. Wearing uncomfortable clothes on purpose is an example of what former Princeton hockey player and Nobel Prize winner Michael Spence taught economists to call 'signaling.'