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'Market rumors became self-fulfilling'
"I want to emphasize that the impetus for the run on Bear Stearns was in the first instance the result of a lack of confidence, not a lack of capital or liquidity. Throughout this period, Bear Stearns had a capital cushion well above what was required to meet regulatory standards. However, by Thursday of that week, a tipping point was reached on liquidity. The market rumors became self-fulfilling and Bear Stearns' liquidity pool began to fall sharply."
"As devastating as these events have been for the Bear Stearns family, the failure of Bear Stearns could have had an even more extensive, devastating impact on the stability of the financial markets as a whole. And it may have triggered a run on other investment banks, with potentially disastrous effects on the nation's economy. Like all of us, I am certainly glad such a disaster did not occur."
NEXT: Fed's actions 'extraordinary' but legal
Last updated April 03 2008: 2:29 PM ET
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