The former vice-chairman of the Federal Reserve has said he “deeply regretted” the pain caused to millions of people around the world from the financial crisis, admitting that “the cops weren’t on the beat”.
Don Kohn’s apology for the actions of Federal Reserve in the run-up to the financial and economic crisis goes significantly further than the limited responsibility taken by his former boss, Alan Greenspan.
Speaking to British MPs at a confirmation hearing on Tuesday, Mr Kohn nevertheless said his experience would be valuable for the Bank of England, where he has been appointed to a new committee with powers to guide UK financial stability.
“I believe I will not make the same mistake twice,” he said.
Mr Kohn has been appointed to the Bank’s new Financial Policy Committee, which will soon have powers to change system-wide UK financial regulations and even limit borrowing by households and companies if it thinks there are threats to financial stability.
Having been a strong advocate of the Greenspan doctrine not to burst asset bubbles but to mop up any mess after a crash, Mr Kohn recanted much of his previous view in front of MPs. He said he had “learnt quite a few lessons – unfortunately” from the financial crisis, including that people in markets can get excessively relaxed about risk, that risks are not distributed evenly throughout the financial system, that incentives matter even more than he thought and transparency is more important than he thought.