Video - Bernanke Addresses The Economic Club of New York - Nov. 16, 2009
B-52 spoke yesterday before the Economic Club of New York. You'll notice Maria Bartiromo, upper right, taking copious notes during the 4-minute clip, as she pretends to be a journalist.
Bernanke spent part of a question-and-answer period talking about banks and Wall Street firms being "too big to fail" and the problem of valuing assets on their balance sheets.
He said he hoped that the "too big to fail" doctrine that led to the bailout of major banks and Wall Street firms following the bankruptcy of Lehman Brothers needed to become a "relic" in the future, but that could only happen through the creation of new procedures for closing such firms in a more orderly manner.
"We need to have some alternative to bankruptcy or bailout," he said. "We need to have another way to close firms that come to the brink of failure without destroying the rest of the system."
Bernanke said that he doesn't endorse rolling back the 1999 law that allowed commercial banks to engage in Wall Street trading and investment banking. He said he doubts keeping those restrictions in place would have prevented the crisis in financial markets.
"I don't think simply making banks smaller is going to do it," he said when asked about how to get rid of the reality of "too big to fail."
"Banks can still be systemically critical, even if they're somewhat smaller," he added. He also said that large bank failures are not the only threat to the economy.
"After all, in the 1930s we didn't have too many large bank failures, but we had thousands of small bank failures," he said.
But he said that in the future, regulators of major firms needed to be able to place curbs on banks engaging in trading or investment banking activities on a case-by-case basis.
A year ago Bernanke told the same gathering that what he most wanted was to know what all the so-called toxic assets on major financial firms' balance sheets were worth. Monday he said despite improvements made in judging the value of assets in the last year, "I'd still like to know what the stuff is worth."
