Washington Week: Student Voices (O)

At UC-Berkeley, Fed Chairman, Panelists Analyze Future Economy
By Katie Meyer
Daily Californian, UC-Berkeley
November 02, 2008

Federal Reserve Chairman Ben Bernanke spoke to about 100 businesspeople, UC Berkeley students and faculty at the Alumni House on Friday, addressing the mortgage meltdown and the government's plans to help rescue the economy.

During the annual mortgage and public policy symposium, co-hosted by UC Berkeley and UCLA, Bernanke spoke for about 30 minutes via telecast, and began by explaining the origins of the economic slump.

"The boom in subprime mortgage lending was only a part of a much broader credit boom characterized by an underpricing of risk, excessive leverage and the creation of complex and opaque financial instruments that proved fragile under stress," he said.

He also outlined a range of potential steps-from a return to privatization to further nationalization-that the government is considering.

After his speech, a panel of five economics professors from UCLA, UC Berkeley and Stanford University commented on his analysis, and offered their own perspectives on the crisis in place of a question and answer period with Bernanke.

After a brief introduction, the chairman sank into a grave analysis of the economy, revealing that the reserve had not yet decided on its next move after the bailout. He hinted that further government backing would be necessary to stabilize the mortgage market and the economy.

"The ability of Fannie, Freddie, and Ginnie to continue to securitize mortgages has largely depended on the confidence of investors that the government stands behind these organizations," he said.

Panelist Barry Eichengreen, a UC Berkeley economic professor, called Bernanke's speech "an articulate defense" of the government's decision to take over Fannie Mae, Ginnie Mae and Freddie Mac, a plan with which many of the panelists disagreed.

Most attendees, many of whom were UC Berkeley economics and public policy students, perked up when the panelists moved to a discussion of how long the recession might last.

The panelists unanimously agreed that the American economy's recovery would take at least two years after the recent slump.

"I suspect this will be a difficult year to come out of school and find a good job," said UC Berkeley economics professor Aaron Edlin, a panelist at the event. "More students will turn to graduate or professional schools."

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