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Foreclosures already pocked Chicago’s poorer neighborhoods but the downtown still was booming as the Federal Reserve Bank of Chicago convened its annual conference in May 2007.
The keynote speaker, Federal Reserve Chairman Ben S. Bernanke, assured the bankers and businessmen gathered at the Westin Hotel on Michigan Avenue that their prosperity was not threatened by the plight of borrowers struggling to repay high-cost subprime loans. Bernanke, who was in charge of regulating the nation’s largest banks, told the audience that these firms were not at risk. He said most were not even involved in subprime lending. And the broader economy, he concluded, would be fine.
“Importantly, we see no serious broad spillover to banks or thrift institutions from the problems in the subprime market,” Bernanke said. “The troubled lenders, for the most part, have not been institutions with federally insured deposits.”
He was wrong. Five of the 10 largest subprime lenders during the previous year were banks regulated by the Fed. Even as Bernanke spoke, the spillover from subprime lending was driving the banking industry into a historic crisis that some firms would not survive. And the upheaval would shove the economy into recession.
More from Ken Silverstein:
Perspective — October 23, 2013, 8:00 am
How pro-oil Louisiana politicians have shaped American environmental policy
Postcard — October 16, 2013, 8:00 am
A trip to one of the properties at issue in Louisiana’s oil-pollution lawsuits
Acres of hemp grown by “patriotic‚” U.S. farmers in 1942 at the behest of the U.S. government:
A study suggested that the health effects of exposure to nuclear radiation at Chernobyl were no worse than ill health resulting from smoking and normal urban air pollution.
Greenpeace apologized after activists accidentally defaced the site of Peru’s 2,000-year-old Nazca Lines when they unfurled cloth letters reading “time for change” near the ancient sand drawings. “We fully understand,” the group wrote in a statement, “that this looks bad.”
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“I hope that after reading the following pages the leaders of the Y. M. C. A. will start a campaign to induce good young men to do nothing. If so, I shall not have lived in vain.”