SA Guest

Geithner!

A speech by Timothy Geithner from March 23, 2007 (about the time the credit crisis began)

Credit Markets Innovations and Their Implications

"The past few years have seen remarkable changes in credit markets, and this is a good time to take stock of what we know about those developments and their implications.

The latest wave of credit market innovations has elicited some concerns about their implications for the stability of the financial system, concerns similar to those associated with earlier periods of rapid change in financial markets. Will the most recent credit market innovations amplify credit cycles, contributing to "excessive" lending in times of relative stability, and then magnify the contraction in credit that follows? Will they introduce greater volatility in financial markets? Will they create greater risk of systemic financial crisis?

These concerns have been heightened in some quarters by the problems currently being experienced in the subprime mortgage sector. It will take some time before the full implications are understood and the full impact can be assessed. As of now, though, there are few signs that the disruptions in this one sector of the credit markets will have a lasting impact on credit markets as a whole.

Indeed, economic theory and recent practical experience offer some reassurance against both these specific concerns and more general worries about the implications of credit market innovations for the performance of the financial system..."

www.newyorkfed.org/new...

(Ben Bernanke could not have said it better)