Fed Releases Transcripts from 2008
Meetings
Fox Business News Online
(Retrieved 02/21/2014) –
http://www.foxbusiness.com/economy-policy/2014/02/21/fed-releases-transcripts-from-2008-meetings/
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By Dunstan Prial:
Transcripts
from 2008 Fed meetings divulge publicly, for the first time, details of
decisions made by the central bank during the height of the financial crisis.
[US Federal Reserve Chairman Ben] Bernanke proposed two options: an emergency
term securities lending facility and to expand and extend the currency swap
lines with struggling European banks.
By
late October, after the collapse of Lehman Brothers and the fire sales of
several other large banks on the brink of collapse, the Fed had dropped
interest rates to about 1% and introduced a host of other emergency measures.
And Fed policy members were apparently quarreling over whether those measures
and how they were communicated to the public were helping or harming.
At
the Fed’s Oct. 28-29 meetings, Timothy Geithner, then president of the New
York Fed, scolded some colleagues for suggesting the Fed’s bold moves were
hurting broader confidence in the economy: “Now, a lot of things happened
over the last three months and the last year, and a lot of things happened in
terms of policy over the last six weeks. There is no doubt that communication
about policy by all the arms of the
“There
is also no doubt that inevitably in a crisis like this, when policy moves
forcefully, it is scary because a lot of people are not yet at the point of
assessing or understanding the forces driving our decisions. But I think it’s
just unfair to suggest that the actions by the Chairman and this Committee
were a substantial contributor to the erosion in confidence and to
uncertainty about further policy actions, even though it’s true that when we
move with force and drama it has the risk of adding to uncertainty.”
Geithner
was a key supporter of the activist measures taken by the Fed before being
named Treasury Secretary after Barack Obama was elected in November 2008. The
transcripts, which run into the hundreds of pages, reveal that this was the
beginning a series of unprecedented measures taken by the Fed in an effort to
stave off another Depression.
The
14 transcripts are from eight scheduled meetings and six emergency meetings
of the policy setting Federal Open Market Committee, which sets the central
bank’s monetary policy, including the level of short-term rates.
The
transcripts do not include other meetings at which smaller groups of Fed
officials, working with the Treasury Department, arranged the bailouts of
bankrupt Bear Stearns, the American International Group (NYSE: AIG), and
housing service entities Fannie Mae and Freddie Mac.
Nor
do the transcripts include notes from the meetings at which policy makers
decided to let investment bank Lehman Brothers fall, which occurred in
September 2008 and proved a key event at the outset of the crisis.
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Go Lean
Commentary
This foregoing article is part of the process
of post-mortem analysis, sometimes referred as “Monday Morning
Quarterbacking” or “Armchair Quarterbacking”. This can be a helpful process
as it allows for lessons-learned of previous episodes and the mitigation of
future risk. This is the premise of the book Go Lean …
The book is inspired by
the words of famed American Economist Paul Romer, who coined the phrase: “A
crisis is a terrible thing to waste”. The above article shows that this
philosophy was also incorporated in the undertakings of many of the
stakeholders battling the challenges of 2008 – they did not waste the crisis.
Many things that were blatantly wrong in the macro economy before 2008 were
corrected by this crisis. The “easy money” policies and NINJA (No Income No Job
or Assets) loans of the
2000’s decade were abated. The financial industries have now moved back to
more sound, fundamental lending principles.
How about the
Unfortunately, with the
ever-expanding brain drain/human flight crisis in the
What qualifies the
writers of this book to make these assessments?
Simple! They have lived
the issues depicted in this foregoing news article and the Go Lean roadmap. The book is
published by the SFE Foundation, a Community Development Corporation
constituted by members of the Caribbean Diaspora. These are people who love
their homeland, and would rather live, work and play there, but instead, find
themselves toiling as alien residents in foreign lands. Principals of this
foundation were also there in 2008, engaged with major stakeholders of the
Global Financial crisis: Lehman Brothers, JPMorganChase, CitiGroup, etc. They
were on the inside looking out, not the outside looking in. They were
movers-and-shakers of the macro economy, not just armchair quarterbacks.
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