What Eere The Effects Of The Central Bankers On The Recent Economic Crisis?

1546 words - 7 pages

A central bank is an institution that oversees the commercial banking system of the country. Functioning as the bank of the government, its primary responsibility is to manage the country’s money supply including, but are not limited to, managing interest rates, supervising banks, regulating the credit system, governing exchange reserves, and serving as a lender of last resort. The central bank has the power to control whether or not to increase the amount of money and printing the national currency. Some examples of central banks today are European Central Bank, the Bank of England, and the Federal Reserve of the United States. The central bank plays a crucial role in a country’s economy. Central bankers, therefore, hold tremendous power and with power comes responsibility. The chairmen of central banks: Ben Bernake of the U.S. Federal Reserve, Mervyn King of the European Central Bank, and Jean-Claude Trichet of the Bank of England are examples of central bankers who hold such burdens. Everything they do can risk billions, if not, millions of dollars and greatly affect the growth, employment, and/or inflation of the country’s economy. During the recent financial crisis in 2008, the three central bankers, Ben Bernake, Mervyn King, and Jean-Claude Trichet, played a huge part in steering our economy away from collapsing.
Before the financial crisis of 2008, many people, including renowned economists, did not see it coming. During a period of what seemed like stability, the economy began to feel the impact of the accumulated effects of the flaws in our banking system. Although there were many signs of the deteriorating economy, people failed to notice at the time. The driving force behind this devastating crisis was the lenient requirements from banks for loans. Loans were available to almost everyone without questioning their creditability. This was a huge mistake because many could not repay this debt and started defaulting on their loans. By 2007, more than 25 subprime lenders filed for bankruptcy.
In The Alchemists: Inside the Secret World of Central Bankers, Neil Irwin reasserts that the housing bubble is a main cause in the eventual economic downturn. And because the United States’ economy has the most power and influence, the crisis in America affects the global economy. Any catastrophe in the United States economy could potentially lead to a global financial meltdown. Therefore, this crisis caused anxiety and uneasiness everywhere. The U.S. Federal Reserve had the responsibility to take charge and Bernake was quick to start planning, "Bernake and his inner circle- New York Fed president Time Geithner, Board of Governors vice chairman Donald Kohn and member Kevin Warsh, Fed monetary affairs director Brian Madigan- spent much of the two days of proceedings in their secure conference room on the second floor, plotting their response to the emerging panic". This displays the severity of the situation that requires immediate response and...

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