Ben Bernanke: ‘All but one major financial firms at risk of collapse during global crisis’

31 January 2011

Nearly all major US financial institutions were at risk of collapse during the financial crisis, the chairman of the Federal Reserve has said.

The comments made by Ben Bernanke during November 2009 were released alongside a report into the reasons behind the global credit crisis by the Financial Crisis Inquiry Commission.

In a private interview with the commission, Mr Bernanke said "If you look at the firms that came under pressure in that period ... only one ... was not at serious risk of failure. Even Goldman Sachs, we thought there was a real chance that they would go under."

Mr Bernanke did not say which one from the 13 firms in the US was not at risk during the crisis.

The report, which was published at the same time as the comments, stated that the crisis could have been avoided if “key policymakers” had been more prepared and possessed a better understanding of the financial system

Phil Angelides, chairman of the commission, said: “Despite the expressed view of many on Wall Street and in Washington that the crisis could not have been foreseen or avoided, there were warning signs.

“The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done. If we accept this notion, it will happen again.”

Excessive borrowing by financial institutions and the Federal Reserve’s inability to contain the surge in toxic mortgages were also cited as reasons behind the crisis, the report revealed.

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