Addressing the Ongoing Crisis in the Housing and Financial Markets, January 28, 2009, Testimony before the Committee on the Budget, United States Senate.
“…the ongoing crisis in the U.S. financial system has significantly depressed economic activity during the past year and a half, and it poses a serious threat to the nations ability to quickly return to a path of solid economic growth. Losses on mortgages, on assets backed by mortgages, and on other loans to consumers and businesses, together with an associated pullback from risk taking in many credit markets, have raised the cost and reduced the availability of credit for borrowers whose credit ratings are less than the very highest. To be sure, among the fundamental causes of the crisis was the provision of too much credit at too low a price as well as insufficient capital. However, the sudden shift to a much higher price for risk taking has led to a significant reduction in wealth and borrowing capacity; it has also forced a number of financial institutions to close and others to be merged with stronger operations. Those forces, in turn, are weighing heavily on consumption, the demand for housing, and businesses investment.”
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