NEW YORK (
) -- Federal Reserve Chairman Ben Bernanke Friday acknowledged that the government's efforts to bring the country out of the financial crisis have yet to help out much on the job front.
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," Bernanke said, according to a
The national unemployment rate stood at 9.6% in August, according to
. The statistics for September will be released on October 8.
The speech was at a conference co-sponsored by the Center for Economic Policy Studies and the Bendheim Center for Finance at Princeton, and Bernanke largely spoke about how the financial crisis has impacted the study of economics, and argued that the discipline doesn't need a complete overhaul, as he said some have opined.
"Almost universally, economists failed to predict the nature, timing, or severity of the crisis; and those few who issued early warnings generally identified only isolated weaknesses in the system, not anything approaching the full set of complex linkages and mechanisms that amplified the initial shocks and ultimately resulted in a devastating global crisis and recession," Bernanke conceded before going on to detail how he believes economic research helped regulators understand and respond to the crisis.
In keeping with his previous life as a Princeton professor, Bernanke's comments were mostly dense and of an academic nature, and he was careful to spread the blame between both the public and private sectors.
"The problem in this case was not a lack of professional understanding of how runs come about or how central banks and other authorities should respond to them," he stated, according to the transcript. "Rather, the problem was the failure of both private- and public-sector actors to recognize the potential for runs in an institutional context quite different than the circumstances that had given rise to such events in the past."
Bernanke discussed the shadow banking system a number of times in the speech, underlining the importance of the role he believes it played in the financial crisis.
bank failures in turn were partly the result of a regulatory structure that had not adapted adequately to the rise of shadow banking and that placed insufficient emphasis on the detection of systemic risks, as opposed to risks to individual institutions and markets," he said.
Near the end of his remarks, Bernanke gave a quick summary of his defense of economic studies in the wake of the crisis.
"In short, the financial crisis did not discredit the usefulness of economic research and analysis by any means; indeed, both older and more recent ideas drawn from economic research have proved invaluable to policymakers attempting to diagnose and respond to the financial crisis," he said.
Written by Michael Baron in New York.
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