At a high level, what do you think caused the 2008 global financial crisis? Do you think that a lack of diversity was a root cause of the recent turmoil in the banking sector? Do you think it was a root cause of the 2008 GFC?
Senator, again, I would focus on my time in the past year of being a governor and focusing on the inflation fight. My worry is that especially at the Federal Reserve, which is doing important supervisory work, to the extent that we're focused on diversity, that may distract from our ability to focus on far more important things that are at the root of the Federal Reserve's mandate.
Thank you, Mr. Chairman. I appreciate everybody being here and I appreciate the chairman for holding this important hearing. And I want to start maybe by just pointing out the obvious that one of the important things the Federal Reserve does, of course, is hopefully help us prevent the next global financial crisis. And I want to focus in particular on Miss Cook on some of your views here because I think you've written some things I agree with, you've written some things that I disagree with, too. And so just to start with and to give you some chance to explain your particular perspective here. I understand this is a very complicated question but at a high level what do you think caused the 2008 global financial crisis?
I think there were multiple factors causing the 2008 crisis. Certainly, I would say living in Michigan, I certainly saw the mass layoffs that allowed for people who had taken out mortgages to no longer be able to make those payments. So that to me was one of the primary causes. But certainly extending credit in a way that was not sensible, both receiving credit and extending credit, especially in the subprime sector, helped to cause the global financial crisis.
Well, I appreciate that, Miss Cook, and I agree with you. And you know, of course, one thing that I'd add here is that we took, as you said, some primary credit problems and really exploded them by introducing a whole host of highly complex financial instruments. Seems like nobody understood them especially well. That obviously provided a lot of leverage in the economy. And so when $10 disappeared, all of a sudden a million dollars disappeared, $10 million disappeared, and on and on the dominoes went. I want to ask Miss Cook, if you had to rank it, where would you say a lack of racial and gender diversity ranks on that list? Would you say it's a top five factor, top 10 factor, in what caused the global financial crisis? Lack of gender and racial diversity, of course, at the big banks.
Senator, as a Federal Reserve governor, I think about the dual mandate first and I think about the two legs of that dual mandate and those are maximum employment and stable prices. And as a governor, I have been engaged with my colleagues on the Federal Open Market Committee in fighting inflation aggressively and I have been focused on the dual mandate and that's how, if reconfirmed, I would plan to proceed.
I appreciate that Miss Cook and the reason I asked this question is this. So, in a 2019 interview, you said that a lack of women and diversity leads to the next economic crisis. In another speech that year, you suggested a lack of diversity was quote at the root of the financial crisis and the great recession. So, my question is, do you think that a lack of diversity was a root cause of the recent turmoil in the banking sector? Do you think it was a root cause of the 2008 GFC?
Senator, again I would focus on my time in the past year of being a governor and focusing on the inflation fight. When I have written about diversity in particular, something that you might be interested in that you focused on is innovation and where capital goes and where in the country it is. So, certainly as a Fed governor, I've been out in all parts of the country listening to community banks and listening to communities about where credit is available and where it is not and what the Federal Reserve might be able to do to provide such credit in the system, which is part of our dual mandate.
I appreciate that, Miss Cook, and I will say that I hope you continue that work because I certainly agree that we need to extend credit where possible and make sure that businesses, whatever the color of the skin of the founder, have access to capital. And I think that's probably an area where there's some alignment between the two of us. The final point that I'd make and the reason I asked this question and probably one of the last times I'll ever get to talk to you and you're likely to be confirmed is I really worry about how much time we focus on the tasks that we have in a given day. And if we're focused too much on the wrong things, we don't have enough time to focus on the right things. That's certainly true in my job. I think it's true in any other job. My worry is that especially at the Federal Reserve, which is doing important supervisory work, to the extent that we're focused on diversity, it may distract from our ability to focus on far more important things that are at the root of the Federal Reserve's mandate. So, I hope whatever your views and whatever your disagreements and agreements with me on that topic, when you're confirmed, as you likely will be, you take the focus on the core function and I hope that none of us are distracted by some of these other concerns because I think that's what may lead to the next financial crisis. A lack of supervisory authority from the Federal Reserve and I think over focusing on diversity actually enhances and makes that more likely, doesn't make it less likely. Thank you for answering my questions.
Senator Fetterman of Pennsylvania is recognized.
