In a conversation with Brian Carney of the Wall Street Journal, economist Randall Kroszner describes how he experienced the financial crisis during his time at the Federal Reserve.
What was it like to be a policy maker during one of the most challenging economic times in recent memory? In a conversation at the recent Charles Street Symposium, former Fed Governor and University of Chicago professor Randall Kroszner spoke about his experience.
Kroszner discussed how the enormous levels of contractual uncertainty at the height of the crisis led to a freezing of markets and that the main goal of the Federal Reserve at the time was to avoid large scale deflation.
Kroszner elaborated on the difficulty of finding the right balance between letting companies and institutions fail and providing liquidity into a system to prevent unnecessary insolvencies and a repeat of a Great Depression scenario.
“It certainly was the eye of the storm. We were facing a lot of uncertainty, and new kinds of uncertainty: things we hadn’t really seen before, or certainly hadn’t seen in seventy, eighty, or ninety years.”
“It certainly was the eye of the storm. We were facing a lot of uncertainty, and new kinds of uncertainty: things we hadn’t really seen before, or certainly hadn’t seen in seventy, eighty, or ninety years.”
Kroszner concluded with the assessment that the US still needs more robust signs of sustainable recovery before a return to higher interest rates and non-crisis economic policy.
Randall Kroszner is Norman R. Bobbins Professor at the Booth School of Business a the University of Chicago. He served as governor of the Federal Reserve System from Marcxh 2006 until January 2009.
The conversation took place during the recent Charles Street Symposium, the Legatum Institute’s new annual forum for the world’s leading young economists. The inaugural symposium focussed on issues of economic risk and uncertainty.