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2 Sep, 2010 21:14

It’s time to end too big to fail – Bernanke

Federal Reserve Chief Ben Bernanke testified before the Financial Crisis Inquiry Commission (FCIC) in a public hearing regarding the causes of the financial crisis.

The FCIC is a ten 10-member congressionally appointed panel that was established in 2009 to figure out what caused the economic collapse.

Bernanke spoke directly on the topic of "Too Big to Fail: Expectations and Impact of Extraordinary Government Intervention and the role of Systemic Risk in the Financial Crisis."

The questioning began with FCIC Chairman Phil Angelides, asking:

How fundamental was the failure of proper supervision to the metastasizing of this problem?

Bernanke explained that, “The most important lesson of this crisis is we have to end too big to fail … tough regulation and oversight will reduce the risks … there has to be a credible way to let firms fail. In fact, to require that they fail.”

The Fed Chief also noted, “We should not imagine that it is possible to avoid all crises.”

Many question whether or not this yearlong investigation will actually help to prevent a future financial crisis, or if it is all for political show.

The findings of this commission will help us better understand the causes of the crisis which in turn should increase our ability to avoid future crisis,” said Bernanke.

It’s been a long journey for this commission,” added Angelides.

Nomi Prins, author of “It Takes a Pillage” and a senior fellow at Demos said the inquiry was light on Bernanke and that committee intentionally let out key questions.

This is the man and this is the Fed that not only allowed, was involved in watching a situation get out of control before stepping in, but when everything was at its worst in the fall of 2008, this is the guy, this is the Fed, these are the people who make these decisions and who are allowed to, by virtue of the Federal Reserve Act, made big banks bigger, and they remain bigger,” said Prins.

She argued that the Fed and Bernanke made the situation worse. These are the issues the inquiry should have addressed and asked questions about. In fact, the Fed has expressed regret that they did not bail-out and rescue other big businesses, when in actuality the bailouts made the economy worsen, not better, said Prins.