Bernanke: Fed policymakers need a better grasp of how speculative behavior affects economy

Fed boss wants closer look at speculative buying

WASHINGTON — Federal Reserve Chairman Ben Bernanke says policymakers need to get a better handle on the forces behind speculative buying that can damage the economy when it comes to a halt.

Frenzied buying fed a housing bubble that burst, plunging the economy into a recession in 2007, the worst downturn since the 1930s. While many lessons were learned from the crisis, Bernanke, in prepared remarks Friday, says additional research is needed to explain when and why bubbles start.

That — along with a better understanding of how bursting bubbles affect consumers, businesses and investors — would be helpful to Fed policymakers as they seek to prevent another financial crisis from happening, he says.