Though the U.S. mortgage industry has received the lion’s share of blame for recent difficulties
in the global financial markets, Federal Reserve Board chairman Ben Bernanke,
in remarks before the Economic Club of New York on Oct. 15, suggested that the subprime
issues were “perhaps more a trigger than a fundamental cause” of the turmoil. Examining
the context of the crisis, and the Fed’s policy reactions, Bernanke said that the loss of confidence
in mortgage-backed securities has caused investors to take a much-needed look at the risks
involved in complex financial products as a whole. A “healthier financial system” is likely to
emerge in the long term, he noted, as “increased investor scrutiny of structured credit products”
leads to greater transparency and a more effective credit-rating process. His speech is excerpted
here; the full text is in the testimony and speeches section at www.federalreserve.gov.
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