EconomicCrisis.US

Former Federal Reserve Chairman Alan Greenspan said Friday the central bank and other U.S. regulators “failed” during the financial crisis because they became too complacent about risks.

“Even with the breakdown of private risk-management, the financial system would have held together had the second bulwark against crisis — our regulatory system — functioned effectively,” Mr. Greenspan said in the text of a speech at a Brookings Institution conference Friday. “But, under crisis pressure, it too failed.”
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Proposed reforms for the financial system should reduce the extent of risk-taking by the biggest U.S. banks and may bolster their ratings, Fitch Ratings said on Friday.

The debate is intensifying over legislation for the banking system designed to avert another global financial crisis. Although the final form of changes to the laws is uncertain, indications of the broad effects it may have on banks are becoming clearer, Fitch said.

“In the near term, reforms are expected to reduce the risk profile of the industry and most particularly the risk profile of the largest U.S. banks,” Fitch said in a special report on U.S. financial institutions. “This would generally imply positive credit rating implications.”
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The U.S. economy still needs help from the Federal Reserve’s ultra-low interest rate policy, but the central bank stands ready to remove stimulus once the expansion “matures,” Chairman Ben Bernanke said on Thursday.

In prepared testimony before the House of Representatives Financial Services Committee, Bernanke offered a brief overview of the tools the Fed intends to use to reverse the emergency measures taken to grapple with the worst financial crisis since the Great Depression.

“The economy continues to require the support of accommodative monetary policies,” Bernanke told lawmakers. “However, we have been working to ensure that we have the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus.”
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While the global economy is crawling out from the most severe recession and financial crisis of the postwar period, the euro zone debt crisis has significantly increased the chances of a double-dip recession in Europe and a global slowdown. Sovereign risk has recently graduated from being an emerging economy hitch to an advanced economy problem. The Greek debt crisis has occupied center stage of the economic and political debate. It is not just a Greek tragedy–the contagion could spread to Portugal, Spain, Italy and Ireland. Indeed, at stake is the entire euro zone framework. Yet fiscal sustainability and sovereign risk also loom over other advanced economies like Japan, the U.K. and the U.S.
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