Donald Kohn, the vice chairman of the Board of Governors of the Federal Reserve System, discussed the factors that led to the current financial crisis and the role of the Fed in promoting financial stability in front of a few hundred people in Leverone Auditorium on Monday.
In his speech, which was also attended by Northwestern President Morton Schapiro and the President of the Federal Reserve Bank of Chicago Charles Evans, Kohn focused on the role of monetary policy in maintaining financial stability but also pointed to other factors that contributed to the current financial crisis, including “inadequate risk assessment and management.” Citing the tightening policies in 1999 during the dot-com bubble and in 2004 during the housing bubble, Kohn said that the evidence is not encouraging for using monetary policy to ensure financial stability. Instead, he expressed “strong preference” for financial regulation and supervision.