Federal Reserve Bank of Boston's CEO told UW-Madison students Thursday the ability to get short-term loans will be more difficult in future years.
Eric Rosengren, a UW-Madison alum, spoke about the role of financial institutions and markets in the current economic crisis.
Rosengren addressed the relationship between the declining economy and a bank liquidity lock,"" or the trend of banks restricting lending among themselves.
""This unwillingness to take credit risk '¦ could constrain credit-worthy borrowers from undertaking worthwhile projects and thus have implications for economic growth,"" Rosengren said.
This will make it more difficult for high-quality borrowers, and even students, to get short-term loans, according to Rosengren.
""During the recent financial turmoil, some fundamental assumptions about the financial system have proven to be seriously flawed,"" Rosengren said.
He said flaws in the financial system have led to the creation of short-term facilities, such as the recently passed bailout bill, designed to tackle the liquidity problem. He said he hopes these facilities will restore confidence in credit markets and promote economic growth.
Rosengren received both a master's and doctorate degree in economics from UW-Madison. Before taking the position of CEO in July 2007, Rosengren worked within Boston's federal reserve bank for 22 years in the research and regulation departments.
His work as an economist has been widely published. He is also involved in the Federal Open Market Committee, which determines the appropriate stance of monetary policy based on current financial conditions.
UW-Madison economics professor Kenneth West said in a statement he felt fortunate to have Rosengren speak on campus because he can provide ""valuable insight and perspective on these tumultuous economic times.""
There was a large turnout in Ingraham Hall for the lecture, which was open to students, faculty and staff, as well as the community.
Jillian Walton, UW-Madison junior and president of the university's Economics Student Association, which helped arrange the event, said she thought the presentation was helpful because it clarified the current economic situation.
Walton said she thought the question and answer session with Rosengren following the lecture was the most interesting part ""because students could really engage him.
