Analysis: Fed never grasped risks that triggered crisis

12/21/2009 | Washington Post, The

The Federal Reserve failed to take action to prevent a near collapse of the U.S. financial system because it did not comprehend financial risks being taken by banks. The central bank had embraced a mainstream view that innovation had made banking safer. Fed Chairman Ben Bernanke and others thought the economy had entered a period of "great moderation." Instead, the nation endured a credit crunch and the severest economic downturn since the 1930s.

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