The lessons learned from the Great Depression were useful in preventing "an even worse cataclysm" that could have resulted from the recent financial crisis, Federal Reserve Board chairman Ben Bernanke said last week.
"In the current episode, in contrast to the 1930s, policymakers around the world worked assiduously to stabilize the financial system," Bernanke said late Thursday at the Alexander Hamilton Awards dinner, according to prepared text released by the Fed. "As a result, although the economic consequences of the financial crisis have been painfully severe, the world was spared an even worse cataclysm that could have rivaled or surpassed the Great Depression."
Policymakers also moved quickly and forcefully to stem the financial strife. "In October 2008," Bernanke said, "just weeks after the sharp intensification of the crisis, the Congress authorized the Troubled Asset Relief Program (TARP) to support stabilization of the financial system. It was far from perfect legislation, but it was essential for preventing an imminent financial collapse."
The Federal Open Market Committee cut its target for short-term interest rates to record lows, he said, and then "embarked on an unprecedented (for the United States) program of long-term securities purchases, recently completed, to support private credit markets, including the mortgage market."
International cooperation was a key, Bernanke said, adding: "Policymakers, bankers, and business people recognized that the world's economies and financial systems would sink or swim together."
