Ben Bernanke
Ben Bernanke
Ben Shalom Bernankeis an American economist at the Brookings Institution who served two terms as chairman of the Federal Reserve, the central bank of the United States, from 2006 to 2014. During his tenure as chairman, Bernanke oversaw the Federal Reserve's response to the late-2000s financial crisis. Before becoming Federal Reserve chairman, Bernanke was a tenured professor at Princeton University and chaired the department of economics there from 1996 to September 2002, when he went on public service leave...
NationalityAmerican
ProfessionPolitician
Date of Birth13 December 1953
CityAugusta, GA
CountryUnited States of America
Following an extended boom in housing, the demand for homes began to weaken in mid-2005. By the middle of 2006, sales of both new and existing homes had fallen about 15 percent below their peak levels. Homebuilders responded to the fall in demand by sharply curtailing construction.
At this point, a leveling out or a modest softening of housing activity seems more likely than a sharp contraction, although significant uncertainty attends the outlook for home prices and construction.
Home purchases that are very highly leveraged or unaffordable subject the borrower and lender to a great deal of risk. Moreover, even in a strong economy, unforeseen life events and risks in local real estate markets make highly leveraged borrowers vulnerable.
Many savers are also homeowners; indeed, a family's home may be its most important financial asset. Many savers are working, or would like to be.
Consumers going through foreclosure typically will see their credit scores drop, raising longer-term questions about their ability to rebound financially and perhaps pursue a more sustainable home purchase at some later point.
Many foreclosed homes are neglected or abandoned, as legal proceedings or other factors delay their resale. Deteriorating or vacant properties can, in turn, directly affect the quality of life in a neighborhood, for example, by leading to increases in vandalism or crime.
The crisis and recession have led to very low interest rates, it is true, but these events have also destroyed jobs, hamstrung economic growth and led to sharp declines in the values of many homes and businesses.
Well, the U.S., of course, is the world's largest economy. It's about a quarter of the world's output. It's also home to many of the largest financial institutions and financial markets.
For many of us, owning a home signaled a passage into adulthood that coincided with the start of a career and family.
The decline in home equity makes it more difficult for struggling homeowners to refinance and reduces the financial incentive of stressed borrowers to remain in their homes.
I came home from school one day, and there was a phone call for me. And I picked up the phone. They said, 'This is the Harvard Admissions Department. We'd like to let you know that you're accepted in the freshman class.' And I said, 'Come on, who is this really?'
The public in many countries is understandably concerned by the commitment of substantial government resources to aid the financial industry when other industries receive little or no assistance. This disparate treatment, unappealing as it is, appears unavoidable.
The role of liquidity in systemic events provides yet another reason why, in the future, a more system wide or macroprudential approach to regulation is needed.
The stress on the financial system in the fall of 2007 was significant, but not so significant as to threaten the overall stability of the U.S. economy, although it did lead to the beginning of a recession at the end of 2007.