Bernanke: Policy has not delivered robust recovery

By Associated Press
Posted Sep. 24, 2010 at 4:04 p.m.

Federal Reserve Chairman Ben Bernanke acknowledged the economics profession has a lot to answer for after the financial crisis of 2007-2009, including why economists have been unable so far to engineer a healthy recovery.

“Although financial markets are for the most part functioning normally now, a concerted policy effort has so far not produced an economic recovery of sufficient vigor to significantly reduce the high level of unemployment,” he said in remarks prepared for delivery to an economics conference at Princeton University.

However, Bernanke, who did not discuss the outlook for the economy or monetary policy in any detail, defended the field of economics.

He said the recent crisis reflected a failure to regulate financial institutions, manage risks and anticipate shocks rather than shortcomings in economic theory.

He urged economists to learn more about human behavior, especially under uncertain circumstances, and to learn more about how asset bubbles form and how the ability of financial firms to sell assets can come to a screeching halt in a crisis.

The Fed is considering providing renewed help to the struggling recovery, probably through large-scale purchases of Treasury securities. Bernanke’s speech comes three days after the central bank said it stands ready to support the recovery if necessary.

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