Jerome Powell Quotes

Many of us like to think of financial economics as a science, but complex events like the financial crisis suggest that this conceit may be more wishful thinking than reality.

Unregulated derivatives like credit default swaps threaten our regulated markets, or indeed our economy without any Federal agency knowing about it.

Do we have to regulate derivatives? Yes, we do. 'Cause when I did this in my investments, frankly, no one knew who could pay who. But derivatives have an important place in our economy.

At the heart of banking is a suicidal strategy. Banks take money from the public or each other on call, skim it for their own reward and then lock the rest up in volatile, insecure and illiquid loans that at times they cannot redeem without public aid.

The problem with the focus on speculators, as was demonstrated during the financial crisis, is that it tends to divert attention from the real villains. During the financial crisis, the villains were the actions of the banks, not the speculators betting on bank share prices.

Everyone failed to appreciate that our sophisticated, hypermodern, highly hedged, derivative-based financial system—how ultimately fragile it really was.

Financial firms believed that if a crisis developed, the insatiable demand for exotic [financial] products would dissipate only slowly. They were mistaken.

Banks are employing risky derivatives strategies to goose up returns….the interbank market could freeze up, and one could well have a full blown financial crisis.

We have institutions that have been allowed to become too big to fail because we had all kinds of flaws in our financial infrastructure, in the whole way over-the-counter derivatives work.

The financial crisis involved significant failures in the functioning, regulation, and supervision of OTC derivatives markets.

Prior to the 2008 recession, many financial institutions were engaging in 'proprietary lending,' where a bank would invest funds for its own gain instead of earning revenue through commission by trading on behalf of clients.

The world of derivatives is full of holes that very few people are really aware of. It's like hydrogen and oxygen sitting on the corner waiting for a little flame.

With government deregulation and the triumph of financial liberalization, the dangers of systemic risks, the possibility of a financial tsunami, sharply increased.

It appears to me that no one has learned a thing; that Wall Street is still operating as if 2008 never happened.

In truth, in the fairy-tale version of bailing out Lehman, the next domino, A.I.G., would have fallen even harder. If the politics of bailing out Lehman were bad, the politics of bailing out A.I.G. would have been worse. And the systemic risk that a failure of A.I.G. posed was orders of magnitude greater than Lehman's collapse.

The very nature of finance is that it cannot be profitable unless it is significantly leveraged... and as long as there is debt, there can be failure and contagion.

Cause and effect, the riddle of all history, is a particular devil in financial history; and never more so than today, where entire classes of security are collapsing not on public exchanges and stock-tickers but because there are no markets to establish prices this side of nothing.

Given the extent of the exposures of major banks around the world to A.I.G., and in light of the extreme fragility of the system, there was a significant risk that A.I.G.'s failure could have sparked a global banking panic.

The banking collapse was caused, more than anything, by bad government policy and the total failure of bad regulation, rather than by greed.

As we try to make the financial system safer, we must inevitably confront the problem of moral hazard.

If banks anticipate government will come to the rescue should the credit market go badly awry, they may make loans that would otherwise be imprudent, e.g. subprime loans with little prospect of repayment.

Today, even small entities that trade complex instruments or are granted sufficient leverage can threaten the global financial system.

Bailing out every bank that fails makes the system riskier, not safer.

The global financial crisis - missed by most analysts - shows that most forecasters are poor at pricing in economic/financial risks, let alone geopolitical ones.

What's so seductive about the efficient markets hypothesis is that it applies nine years out of ten. A lot of the time it works. But when it stops working, you blow up.