Federal Reserve vice chairman Donald Kohn, responding to questions following a speech delivered at Northwestern University Monday on challenges facing the Fed, suggested regulators didn’t fully see the financial vulnerabilities that led to the recent asset-price bubble, and perhaps should have done more to prevent it.

However, as Congress and regulators look at the crisis and its implications for financial reform, Kohn said: “I don’t think [the Fed’s] policies” in 2003, 2004, and 2005 led to lax regulation. It was more 'a build-up of complacency’ and the fact that we had not fully adapted” to changes in the financial system, rather than a lack of oversight.

Earlier, in his prepared remarks, Kohn said that while the Federal Open Markets Committee remains committed to low rates for an “extended period,” that depends on various factors following their expected trajectories.

— Market News International

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