(QOTD) Ben Bernanke: It is not the responsibility of the Federal Reserve to protect lenders
“It is not the responsibility of the Federal Reserve – nor would it be appropriate — to protect lenders and investors from the consequences of their financial decisions."
–Ben Bernanke, 31 Oct 2007 via David Rosenberg’s daily research today
I will see if I can find the original source and context.
Update: A-ha, I have found the original quote via a Washington Post article from 31 Aug 2007. So this is actually not a quote from October 2007 but from August 2007 at the annual KC Fed symposium in Jackson Hole, Wyoming. The post article reads:
"The government’s got a role to play, but it is limited," Bush said at the White House. "A federal bailout of lenders would only encourage a recurrence of the problem."
In anxiously awaited remarks, Bernanke suggested the Fed’s next move will be driven by economic considerations, not only in response to troubles of investors and lenders.
"It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions," Bernanke said. "But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy."
The Times of London covered this story as "Bernanke’s ‘tough love’ for US investors". Draw your conclusions.
Full Speech: Housing, Housing Finance, and Monetary Policy, At the Federal Reserve Bank of Kansas City’s Economic Symposium, Jackson Hole, Wyoming, August 31, 2007 – FRB Website