Boston Fed Chief Rosengren speaks at Open Classroom

Globalization has yielded many economic benefits, but it has also left parts of our world vulnerable to the financial missteps of one country or region, as seen in Europe’s current crisis, said Eric Rosengren, president and CEO of the Federal Reserve Bank of Boston.

Speaking at an Open Classroom Series event, “The Role of Government in the 21st Century,” Rosengren said, “We should be concerned about what’s happening in Europe because if the European sovereign debt crisis gets worse, we are not going to be insulated.” More than 100 students, faculty and community members attended the discussion, held in West Village F on Wednesday.

The seminar-style lecture — focusing on the role of government in the regulation of business — fell on the same day the Federal Reserve and other central banks acted to help foreign banks more easily borrow and lend money, a measure designed to address Europe’s debt crisis.

Rosengren said economic problems tend to occur when assumptions that seem plausible at the time turn out to be very wrong. Sound regulation and smart public and economic policies, he noted, are critical to solving our current challenges.

In the second lecture of the evening, John Kwoka, the Neal F. Finnegan Distinguished Professor of Economics at Northeastern, explained that government regulation of American industry and business as a whole typically follows a cycle: tight regulation ultimately recedes, followed by the tendency for imbalance and other issues to take root, leading back to tighter regulation.

He pointed to America’s Great Recession, in which the government intervened when the housing and auto industries were swept up in financial crisis.

Kwoka also compared the controversial government bailouts of the auto industry and financial institutions, which he said have yielded mixed results. The auto industry bailout, he said, was successful in part because change was strictly enforced and top industry executives were removed.

The banks and financial industry, however, received what he referred to as a “soft bailout.”

“The incentives for bad bank behavior have really not been controlled,” Kwoka said. “The structure, the incentives and even some of the same personnel remain in place, and I believe it’s predictable that banks and financial institutions will do this again.”

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