Richmond Fed Reserve President Lackers Speculates on Recession

In a speech given to the Risk Management Association, Richmond Federal Reserve Bank President Jeffrey Lacker offered speculation on causes of the state of the current US financial market. Securitization of subprime mortgages, falling housing values, and lenient credit to previous ineligible borrowers were named as obvious catalysts for the credit freeze. “The regulatory and supervisory regime surrounding U.S. housing finance also seems likely to have contributed to the boom in housing,” Lacker said, referring to supervisory agencies not being prepared for a shift in housing demand.

He continued on to discuss the role of the government in the financial markets, stating “the scope of financial safety net ultimately must be rolled back,” in order to prevent future risky actions by financial institutions.