“September and October of 2008 was the worst financial crisis in global history, including the Great Depression. Of the 13 most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two.” Former Federal Reserve Chairman Ben Bernanke (From a document filed with the U.S. Court of Federal Claims, August 22, 2014.)
August 26, 2014, 4:03 PM ET
Bernanke: 2008 Meltdown Was Worse Than Great Depression
ByPedro Nicolaci da Costa
Former Federal Reserve Chairman Ben Bernanke, a prominent student of the Great Depression, contends that the 2008 financial crisis was actually worse than its 1930s counterpart.
Mr. Bernanke is quoted making the statement in a document filed on Aug. 22 with the U.S. Court of Federal Claims as part of a lawsuit linked to the 2008 government bailout of insurance giant American International Group Inc.
“September and October of 2008 was the worst financial crisis in global history, including the Great Depression,” Mr. Bernanke is quoted as saying in the document filed with the court. Of the 13 “most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two.”
Former Treasury Secretary Timothy Geithner is quoted in the document offering a similarly apocalyptic assessment. From Sept. 6 through Sept. 22, the economy was essentially “in free fall,” he said.
Starr International Co., a company run by AIG’s former chief executive, Maurice “Hank” Greenberg, sued the U.S. government in 2011, seeking billions of dollars in damages over AIG’s rescue. Starr’s suit alleges that parts of the government’s $182 billion bailout and sale of AIG assets were unconstitutional.
Asked why he thought it was essential for the government to rescue AIG, Bernanke said, “AIG’s demise would be a catastrophe” and “could have resulted in a 1930s-style global financial and economic meltdown, with catastrophic implications for production, income, and jobs.”
Also, the former Fed chief felt comfortable that the overall business was viable despite the troubles of the so-called financial products division.
“It was our assessment that they had plenty of collateral to repay our loan,” Mr. Bernanke said.
The Fed sold the last of its AIG assets in August 2012.
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