At the Fed in 2009, Rolling Dice in a Crisis
Ben Bernanke and his colleagues at the Federal Reserve Board have earned accolades from all corners for the extraordinary actions they took to rescue the financial system in 2009. While 2008 was the Fed’s annus horribilis, exposing how unaware the central bank had been of the risks building in the financial system, 2009 was its year of redemption.
So it was interesting, last week, to read the newly released transcripts from Federal Reserve Board meetings in 2009, which include some of the darkest days of the mess.
With the economy now on a sound footing and the stock market near a record high, the decisions made by the Fed to shore up credit markets in the aftermath of the 2008 crisis look even better.
But the transcripts also reveal for the first time what critics within the Fed were saying about some of the trillion-dollar programs. And even though the critics’ worst fears did not come to pass, their concerns are worth exploring. For this reason alone, the transcripts make for fascinating reading.
There were two basic camps within the Fed. On one side were the reserve bank presidents who wanted to throw anything and everything at the crisis. For the most part, these officials came from regions — like New York and Boston — that are home to big financial firms. They contended that the financial system was in such peril that big substantive action had to be taken, pronto.
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