The substantial uncertainty about the path of asset price movements going forward necessarily reduces the case for altering policy in advance of the move.
The world is likely to view any temporary extension of the income tax cuts for the top two percent as a prelude to a long-term or permanent extension, and that would hurt economic recovery as well by undermining confidence that we're prepared to make a commitment today to bring down our future deficits.
There is a basic lesson on financial crises that governments tend to wait too long, underestimate the risks, want to do too little. And it ultimately gets away from them, and they end up spending more money, causing much more damage to the economy.
This crisis exposed very significant problems in the financial systems of the United States and some other major economies. Innovation got too far out in front of the knowledge of risk.
This crisis is not simply a more severe version of the usual business cycle recession, the typical downturn in which economies ultimately adjust and stabilize.
We judged that a sudden, disorderly failure of Bear would have brought with it unpredictable but severe consequences for the functioning of the broader financial system and the broader economy, with lower equity prices, further downward pressure on home values, and less access to credit for companies and households.
We will not support returning Fannie and Freddie to the role they played before conservatorship, where they fought to take market share from private competitors while enjoying the privilege of government support.
