the fed’s actions in 2008_ what the transcripts

8/12/2019 The Feds Actions in 2008_ What the Transcripts

1/15

Feds Actions in 2008: What the Transcripts Reveal - NYTimes.com

//www.nytimes.com/interactive/2014/02/21/business/federal-reserve-2008-transcripts.html?smid=tw-share&_r=0[2/25/2014 7:26:31 AM]

BUSINESS DAY

The Feds Actions in 2008: What the Transcripts

RevealEB. 21, 2014

On Friday, the Federal Reserve released the transcripts of the 2008 meetings of its Federal OpenMarket Committee, which sets monetary policy. The transcripts provide a detailed account of some of he Fed's key decisions during that crisis year. Here is a look at the fuller picture that the documents

have provided. Related Article

ANUARY FEBRUARY

The Gathering Stormederal Reserve officials are unaware in January 2008 that the economy has already entered a recession. But theed's chairman, Ben S. Bernanke, and his closest advisers are feeling nervous. They worry that the Fed's actions at

he end of 2007 have been insufficient, and that tumbling stock prices represent the start of a broader pullback innvestment.

EMERGENCY MEETING Fed officials conclude in a 5 p.m. conference call that substantialdditional policy easing in the near term might well be necessary.an. 9

MR. BERNANKE: I think there are a lot of indications that we may soon be in a recession. Ithink a garden-variety recession is an acceptable risk, but I am also concerned that such adownturn might morph into something more serious.

Both Mr. Bernanke and Ms. Yellen voice pessimism in the conference call.

MR. FISHER: "While there are tales of woe, none of the 30 C.E.O.s to whom I talked, outside of housing, see the economy trending into negative territory. They see slower growth. Some of them see much slower growth. None of them at this juncture the cover of Newsweek notwithstanding, a great contra-indicator, which by the way shows the road to recession on

Others, like Richard Fisher of the Dallas Fed, are more bullish.
http://www.nytimes.com/pages/business/index.htmlhttp://www.nytimes.com/2014/02/22/business/federal-reserve-2008-transcripts.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p14http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p14http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p14http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p14http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p14http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p14http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p14http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p14http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p14http://www.nytimes.com/2014/02/22/business/federal-reserve-2008-transcripts.htmlhttp://www.nytimes.com/pages/business/index.html


2/15



the issue that is about to come out see us going into recession.

Bank of America announces it will buy the nation's largest mortgage lender, Countrywide Financial, for just $4illion. Bank of Americas Chief Makes Big Bet an. 11

EMERGENCY MEETING At 6 p.m. on Martin Luther King's Birthday, Fed officials decide they can'twait any longer to cut interest rates. The next day the Fed announces the biggest interestate reduction in more than two decades, temporarily halting the stock market's slide. Theenchmark rate is cut 75 basis points, to 3.5 percent.

an. 21

MS. YELLEN: The risk of a severe recession and credit crisis is unacceptably high, and it is being clearly priced now into not only domestic but also global markets.

Early in 2008, as signs of crisis are building, Janet L. Yellen scolds the other members of the Open MarketCommittee, seeking to get them to recognize that they have not done enough.

MS YELLEN: An inter-meeting move will be a surprise, but I think it will show that we get itand we recognize we have been behind the curve.

Ms. Yellen says Mr. Bernankes proposal of a 75 basis-point cut in the Feds benchmark rate is a good step towardecognizing the central banks slowness.

SCHEDULED MEETING The Federal Open Market Committee, or F.O.M.C., cuts its benchmark ratey another 50 basis points to 3 percent, saying financial markets remain under onsiderable stress, and credit has tightened further for some businesses and households.

an. 30

Mr. Bernanke and Treasury Secretary Henry M. Paulson Jr. acknowledge before Congress that the outlook for theconomy has worsened, as both are accused of being overtaken by events. Mr. Bernanke testifies that problems in

ousing and mortgage-related markets have spread more widely and proved more intractable than he expectedhree months earlier. Both officials, however, continue to predict the economy will avoid recession.op Officials See Bleaker Outlook for the Economy

eb. 14

MARCH APRIL

A Liquidity Crisis
http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/2008/01/12/business/12bank.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p59http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p59http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p59http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p60http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p60http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p60http://www.nytimes.com/2008/02/15/business/15econ.htmlhttp://www.nytimes.com/2008/02/15/business/15econ.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p60http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p60http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p60http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p60http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p59http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p59http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p59http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p59http://www.nytimes.com/2008/01/12/business/12bank.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p151


3/15



Companies in the mortgage business began to collapse, unable to find financing as investors lose faith in theudgment of the rating agencies that the companies' offerings are low-risk, AAA-rated investments. The Fed,etermined to offset the lack of private funding, rapidly expands its lending to troubled financial firms, and agreeso help finance JPMorgan Chase's salvage of the largest casualty, Bear Stearns.

Two big housing finance companies, Thornburg Mortgage and Carlyle Capital, move to the brink of collapse.version to Risk Deepens Credit Woes

March 5

The Fed offers up to $200 billion in loans for Wall Street firms, expanding a safety net once restricted toommercial banks. Federal Reserve Board Press Release

March 7

EMERGENCY MEETING Mr. Bernanke convenes another conference call, telling the committee, Weive in a very special time. The Fed doubles Wall Street's safety net to $400 billlion andlso begins to expand its efforts to pump dollars into foreign markets through swapgreements with the European and Swiss central banks.

March 10

The Fed begins to engineer the rescue of Bear Stearns. Two days later, JPMorgan agrees to buy the cripplednvestment bank, less $30 billion in troubled assets that it leaves with the Fed.ed Chief Shifts Path, Inventing Policy in Crisis

March 14

The Fed effectively removes any limits on the amounts it is willing to lend Wall Street with the announcement of yetnother emergency program, the Primary Dealer Credit Facility. The Federal Reserve, in close consultation withhe Treasury, is working to promote liquid, well-functioning financial markets, which are essential for economicrowth, Mr. Bernanke says. Federal Reserve Board Press Release

March 16

SCHEDULED MEETING The F.O.M.C. reduces short-term interest rates for the sixth time in sixmonths. It lowers its federal funds rate by 75 basis points, to 2.25 percent, and makes clear hat it's not done yet.

March 18

MR. GEITHNER: "The hardest thing in this balance now is to try to do something that doesntincrease the incentives so that we become the counterparty to everybody.

Were trying to make sure that its a backstop, but not a backstop thats so attractive thatthey come, and thats going to be a very hard line to walk.

At the March 18 meeting, two days after the Fed rescued Bear Stearns, Timothy F. Geithner, president of theederal Reserve Bank of New York, says he wants the Fed to act as traditional lender of last resort, but he doesnt

want to bail out all of Wall Street.

William Dudley, the official overseeing markets at the Federal Reserve Bank of New York, gives his view of the
http://www.nytimes.com/2008/03/07/business/07credit.htmlhttp://www.federalreserve.gov/newsevents/press/monetary/20080311a.htmhttp://www.nytimes.com/2008/03/16/business/16bernanke.htmlhttp://www.federalreserve.gov/newsevents/press/monetary/20080316a.htmhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p323http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p323http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p323http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p323http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p323http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p323http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p323http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p323http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p323http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p323http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p323http://www.federalreserve.gov/newsevents/press/monetary/20080316a.htmhttp://www.nytimes.com/2008/03/16/business/16bernanke.htmlhttp://www.federalreserve.gov/newsevents/press/monetary/20080311a.htmhttp://www.nytimes.com/2008/03/07/business/07credit.html


4/15



MR. DUDLEY: In my view, an old-fashioned bank run is what really led to Bear Stearnssdemise.

emise of Bear Stearns at the same meeting.

MR. MISHKIN: "We are in a financial crisis, and it is worse than we have experienced in any other episode of financial disruption, which is the word I use. I will not use financial crisisin public. Financial disruption is still a good phrase to use in public, but I really do think thathis is a financial crisis. It is surely going to be called that in the next edition of my textbook."

PARTICIPANT: "When is it coming out?"

MR. MISHKIN: "Wouldnt you like to know!"

At the meeting, Frederic Mishkin, an F.O.M.C. member, discusses the semantics of how to publicly discuss what isoing on in the markets.

MR. PLOSSER: Like everyone else, I am very concerned about the developments in the financialmarkets. Ive been supportive of the steps weve taken to enhance liquidity in the markets

through the TAF, the TSLF, the PDCF or whatever.

MR. BERNANKE: AEIOU.

TIM GEITHNER: Dont say IOU. [Laughter]

There is humor, of sorts, at the meeting:

MR. FISHER: Most distressing to me was Anheuser-Busch, since I am a beer lover. The cost of input of hops and barley has gone up three and a half percent.

And Richard Fisher of the Dallas Fed cites his drinking habits in comments about inflation:

SCHEDULED MEETING The F.O.M.C. cuts rates by another 25 basis points to 2 percent, but thisime it indicates that it's done for now. Officials think they've done enough to arrest therisis and stave off recession. They predict modest growth during 2008 and faster growth in009.

April 30
http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p316http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p316http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p316http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p382http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p316http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p316http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p316http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p316


5/15



MS. YELLEN: "The Feds internal projections represent one of the most pessimistic economicforecasts; yet I find its recessionary projection quite plausible and see downside risks thatcould take the economy well below that forecast.

n early 2008, Ms. Yellen is known as one of the most pessimistic members of the Feds policy making committee,ut even she is way off in her estimates of the magnitude of what is coming. At the Feds two-day meeting in late

April, she shows her concen.

MS. YELLEN: Of course, there is considerable uncertainty about assessing the potential size of these effects. But over the next few months as the checks go out and the retail sales reportscome in, we should get a pretty quick preliminary read on how things are shaping up.

At the same time, though, Ms. Yellen was not envisioning a long recession. She said that while the first half of 008 would likely see no economic growth, in the second half she was expecting growth of 1.5 percent. That viewhat ended up being far too rosy, as was her assessment, at the time, that the likelihood of a severe financialanic has diminished." Part of the reason for her note of optimism, was her faith in the power of governmenttimulus.

MAY AUGUST

A Summer Lullor a time it seems the worst of the crisis is over. The Fed stops cutting interest rates and starts worrying about

nflation. But the housing finance system continues to break down, forcing the government to create a rescue planor Fannie Mae and Freddie Mac, and demand for the Fed's emergency loans continues to rise as the ripplespread inexorably.

SCHEDULED MEETING The F.O.M.C. lets interest rates stand.une 25

The Office of Thrift Supervision closes IndyMac Bank, the first large bank failure of the financial crisis.Regulators Seize Mortgage Lender

uly 11

The Fed extends its safety net to include Fannie Mae and Freddie Mac, authorizing the housing finance companieso borrow money if necessary. The same day, the Treasury Department announces a temporary increase in itsupport for the companies. Officials emphasize that no rescue will be necessary. Treasury Acts to Save Mortgage Giants

uly 13
http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p473http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p473http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p473http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p473http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p475http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p475http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p475http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p475http://www.nytimes.com/2008/07/12/business/12indymac.htmlhttp://www.nytimes.com/2008/07/14/washington/14fannie.htmlhttp://www.nytimes.com/2008/07/14/washington/14fannie.htmlhttp://www.nytimes.com/2008/07/12/business/12indymac.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p475http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p475http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p475http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p475http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p475http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p473http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p473http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p473http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p473http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p473


6/15



EMERGENCY MEETING With the strain on financial markets mounting once again, Mr. Bernankeonvenes the Fed's first emergency meeting since March. The Fed moves to expand both itsomestic and international lending programs.

uly 24

MR. BERNANKE: "I think that, in the absence of our facilities, the risks of systemic problems would be much higher. I think it is useful for us to give a time frame, to provide some sense of assurance to market participants that, if conditions remain stressed, there will be these backups."

While the summer months seem like a lull in retrospect, strains in the financial system are building and Mr.Bernanke is pushing for new action by the Fed to relieve the pressure. There are qualms among policy makersbout how far to go cushion big banks and other financial institutions, but Mr. Bernanke argues that the Fed'sctions are absolutely necessary.

MS. YELLEN: "So let me draw a few morals from this shaggy dog tale. First, troubled banks can be downgraded and fail very rapidly. ... We deal with hundreds and potentially thousands of banks at the discount window and cant monitor and make independent judgments on thehealth of all those institutions on an ongoing basis. We do have to rely on primary supervisors

for assessments. If we act on our own hunches, we are substituting our judgment for that of primary supervisors."

MR. LACKER: I think it is outrageous that the O.T.S. downgraded them and didnt inform theSan Francisco Fed. I hope, Mr. Chairman, that the unacceptability of that sort of behavior iscommunicated at the highest levels to the O.T.S.

Meanwhile, Fed policy makers are growing frustrated with other regulators. Ms. Yellen says that while her bankwas offering loans to the troubled IndyMac, the Office of Thrift Supervision, IndyMacs primary regulator, was

owngrading IndyMac without informing the Fed. And the case of IndyMac, seized by regulators earlier in July as itollapsed, is a warning of how fragile the banking system is becoming.

resident Bush signs into law the Housing and Economic Recovery Act of 2008, which authorizes the Treasury to

urchase government-sponsored enterprise obligations and puts the regulatory supervision of the G.S.E.s (FannieMae and Freddie Mac) under a new Federal Housing Finance Agency. Bush Signs Sweeping Housing Bill

uly 30

SCHEDULED MEETING The F.O.M.C. holds interest rates steady. It frets that inflationary pressuresre building. Three of the regional reserve banks want to raise interest rates.

Aug. 5

EPTEMBER OCTOBER
http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p828http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p828http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p828http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p828http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p828http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/2008/07/31/business/31housing.htmlhttp://www.nytimes.com/2008/07/31/business/31housing.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p838http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p828http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p828http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p828http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p828http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p828http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p828


7/15



Past the Tipping PointHow did the financial system break down? Slowly, and then all at once. The Fed, in conjunction with Treasury Department officials, does not prevent the failure of Lehman Brothers, then decides at the last moment to bail outhe giant insurer American International Group. While making these ad hoc decisions, it continues to rapidly xpand its role as the new source of funding for domestic and international lenders. Mr. Bernanke will say laterhat during these months, the economy was on the brink of a second Great Depression.

The Federal Housing Finance Agency places Fannie Mae and Freddie Mac in government conservatorship.n Rescue to Stabilize Lending, U.S. Takes Over Mortgage Finance Titans

ept. 7

Lehman Brothers files for Chapter 11 bankruptcy protection; Bank of America buys Merrill Lynch.ehman Files for Bankruptcy; Merrill Is Sold

ept. 15

SCHEDULED MEETING The F.O.M.C. continues to hold steady on rates. Most Fed officials say they

till believe the economy is growing, still predict it will grow in the final months of 2008 androw more quickly in 2009. And they still fret that inflation is rising.

ept. 16

MR. ROSENGREN: I think its too soon to know whether what we did with Lehman is right. But we took a calculated bet.

Within hours of Lehmans collapse, the debate begins over whether the decision to let it fail has been the right one.ts a debate that rages to this day, on Wall Street, in Washington and in academia. Eric Rosengren, president of he Boston Fed, raises it one day after Lehman's bankruptcy filing.

MR. HOENIG: I think what we did with Lehman was the right thing because we did have amarket beginning to play the Treasury and us.

Thomas Hoenig, head of the Kansas City Fed, defends the Fed's action.

MR. LACKER: "I dont want to be sanguine about it, but the silver lining to all the disruptionthats ahead of us is that it will enhance the credibility of any commitment that we make inthe future to be willing to let an institution fail and to risk such disruption again."

effrey Lacker, the Richmond Fed chief, says the move has enhanced the Fed's credibility.
http://www.nytimes.com/2008/09/08/business/08fannie.htmlhttp://www.nytimes.com/2008/09/15/business/15lehman.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1041http://www.nytimes.com/2008/09/15/business/15lehman.htmlhttp://www.nytimes.com/2008/09/08/business/08fannie.html


8/15



MR. ROSENGREN: "This is already a historic week, and the week has just begun. The labormarket is weak and getting weaker. The unemployment rate has risen 1.1 percentage points

since April and is likely to rise further. I am not convinced that the unemployment rate willlevel off where the Greenbook is assuming currently. The failure of a major investment bank,the forced merger of another, the largest thrift and insurer teetering, and the failure of Freddie and Fannie are likely to have a significant impact on the real economy."

On Sept. 16, even as Fed policy makers try to gauge the depth of the crisis, some quickly conclude that it is anconomic threat of historic proportions. In a prescient comment, the head of the Boston Fed, Eric Rosengren, sayshe crisis isnt just about Wall Street any more.

MR. BERNANKE: "There are very significant problems with dollar funding in other jurisdictions in Europe and elsewhere."

Worries are mounting that the crisis is spreading overseas quickly. Strains are already evident in Northern Europe,s Norway moves to protect its banking system, and Icelands highly levered banking system approaches collapse.

The Bank of England, Switzerlands central bank, the European Central Bank and the Bank of Japan all need help.ust a minute or so into the meeting, Mr. Bernanke issues a warning.

MR. DUDLEY: The numbers have to be very, very large, or it should be open-ended. I wouldsuggest that open-ended is better because then you really do provide a backstop for the entiremarket.

The answer is to create so-called swap lines, enabling foreign banks to quickly obtain dollar funding from the Fed.But Mr. Bernanke wants to know how much. The answer, according to Mr. Dudley, is a lot.

MR. LACKER: Broadly, Im uncomfortable with our playing that role."

But not every Fed policy maker is so eager to rush to aid overseas central banks, especially in Europe. Jeffrey M.Lacker, president of the Richmond Fed, wonders whether foreign institutions couldnt use their own dollar reserves,ather than immediately benefit from the Feds largess.

Ms. Yellen has developed a reputation for forecasting the recession in 2008, when she gave a cheeky indication of he sort of evidence she was looking at in her posting at the Feds San Francisco regional bank. She said she wasoticing widespread cutbacks in spending on discretionary items popular in California. She expands on theseemarks at the Sept. 16 meeting.
http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p993http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p993http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p993http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1001http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1001http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1001http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1001http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1002http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1002http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1002http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1002http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1002http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1001http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1001http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1001http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1001http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1001http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p993http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p993http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p993http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p993http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1020


9/15



MS. YELLEN: "East Bay plastic surgeons and dentists note that patients are deferring electiveprocedures. (Laughter) "Reservations are no longer necessary at many high-end restaurants. And the Silicon Valley Country Club, with a $250,000 entrance fee and seven- to eight-year waiting list, has seen the number of would-be new members shrink to a mere 13. (Laughter)

mmediately after the policy meeting, a smaller group of Fed offiicals convenes and determines to rescue theAmerican International Group, an insurance company that has become a central player in the housing financeystem. The initial investment is $85 billion. Feds $85 Billion Loan Rescues Insurer

ept. 16

The Fed announces a big expansion of its swap lines with the European Central Bank as well as the central banksf Switzerland, Japan, Canada and England, at 3 a.m., timed to beat the opening of European markets. Later inhe day, Mr. Bernanke goes to Capitol Hill to back the administration's plan to bail out the domestic financialndustry. He warns that the economy is on the verge of collapsing into a second Great Depression.

Vast Bailout by U.S. Proposed in Bid to Stem Financial Crisis

ept. 18

The Federal Reserve Board authorizes the two surviving major investment banks, Goldman Sachs and Morgantanley, to become bank holding companies, ending an era in American finance.hift for Goldman and Morgan Marks the End of an Era

ept. 21

The Fed establishes new swap lines with the Reserve Bank of Australia as well as with the central banks of

Norway, Sweden and Denmark. Federal Reserve Board Press Release

ept. 24

The Office of Thrift Supervision closes Washington Mutual Bank. JPMorgan Chase acquires the bankingperations of Washington Mutual. Government Seizes WaMu and Sells Some Assets ept. 25

EMERGENCY MEETING The Fed approves a further expansion of its swaps with foreign centralanks, and extends the program through April 2009. Later that day, Congress rejects the

Troubled Asset Relief Program, or TARP, sending markets into a tailspin.

ept. 29

MR. EVANS: "Thank you, Mr. Chairman. Id just like to review by asking a question. The swaplines are very large now. Could we review what could go wrong for our balance sheet in a not-so-pleasant scenario?"

Two weeks after the collapse of Lehman Brothers, the international shockwaves are still building. Although swapines to help central banks overseas cope with the crisis were discussed at the Sept. 16 meeting and are in place,articipants in a conference call on Sept. 29 realize much more money is needed to calm the market. Somefficials, like Charles L. Evans, president of the Chicago Fed, wonder about the risks.
http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1023http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1023http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1023http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1023http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1023http://www.nytimes.com/2008/09/17/business/17insure.htmlhttp://www.nytimes.com/2008/09/19/business/19fed.html?ref=businesshttp://www.nytimes.com/2008/09/22/business/22bank.htmlhttp://www.federalreserve.gov/newsevents/press/monetary/20080924a.htmhttp://www.nytimes.com/2008/09/26/business/26wamu.html?pagewanted=allhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/2008/09/26/business/26wamu.html?pagewanted=allhttp://www.federalreserve.gov/newsevents/press/monetary/20080924a.htmhttp://www.nytimes.com/2008/09/22/business/22bank.htmlhttp://www.nytimes.com/2008/09/19/business/19fed.html?ref=businesshttp://www.nytimes.com/2008/09/17/business/17insure.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1023http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1023http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1023http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1023http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1023http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1023


10/15



MR. DUDLEY: Obviously, things are breaking, even with all the tools that weve rolled out. So Ithink that just suggests that more force needs to be applied. Clearly, confidence in themarkets is extraordinarily poor and fragile, and thats another reason that an escalation in theauthorizations is important to reassure people that the central banks are prepared to bethere, if necessary.

Others made it clear that whatever the risks, they have no choice but to act. Bill Dudley, a top official at the NewYork Fed, lays out the case that more force needs to be applied. The swap lines are now authorized to make

620 billion available, up from $290 billion.

Upon reflection, Congress passes and President Bush signs into law the Emergency Economic Stabilization Act of 008, which establishes the $700 billion Troubled Asset Relief Program. Wells Fargo announces that it will buy

Wachovia, the largest bank to disappear during the crisis. Bailout Plan Wins Approval; Democrats Vow Tighter Rules

Oct. 3

Once again widening its safety net, the Fed announces it will ensure that nonfinancial companies can continue toind financing by creating the Commercial Paper Funding Facility. Fed Announces Plan to Buy Short-Term Debt

Oct. 7

EMERGENCY MEETING On another evening conference call, the F.O.M.C. cuts rates by 50 basisoints to 1.5 percent in an action coordinated with other central banks, citing theeterioration of financial markets. The moves are announced the next morning at 7 a.m.

Oct. 7

MR. DUDLEY: "The markets didnt take as much solace as I would have hoped, given the degreeof escalation of those provisions."

MR. LACKER: "So what would it have looked like for them to have taken much solace? I mean, what prices and quantities would change?"

Despite the best efforts of the Fed since the collapse of Lehman in mid-September, financial markets remain inree fall in October, and bank stocks are especially weak. Credit is tightening for even the biggest banks, andenders are getting nervous about providing funds for one another. In other words, the glue of the financial systems coming undone, but Fed officials struggle to figure out why.

After acknowledging the disappointing response of investors, Mr. Dudley is asked by Mr. Lacker if there is a moreundamental problem. There is: Banks need more capital, a lot more -- and within days, Washington will move toail out the biggest banks, a key moment in the crisis.
http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/2008/10/04/business/economy/04bailout.htmlhttp://www.nytimes.com/2008/10/08/business/08fed.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1096http://www.nytimes.com/2008/10/08/business/08fed.htmlhttp://www.nytimes.com/2008/10/04/business/economy/04bailout.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1082


11/15



MR. LACKER: "Could it be that some fundamentals are going on there that market participantsdont view it as addressing?"

MR. DUDLEY: "Well, a fair point is that the Federal Reserve cannot by its actions solve the balance-sheet constraints of the U.S. banking system. The Federal Reserve by its actionscannot create capital for banks, and thats obviously one of the problems at the core of what isgoing on in the financial system."

MR. GEITHNER: "Our basic judgment and I think everybodys judgment is that it is goingto require capital from the government in some mix of forms for that to happen. I dont think that any of us believes that the expansion of our balance sheet alone is going to be sufficient toachieve that outcome. Thats why and I think you all know this the chairman has been working so closely with the secretary of the Treasury to make sure that the authority that theCongress passes is used in a way that has the maximum possible benefit in things that areabout capital so that the probability of default of the financial system goes down and peoplefeel more comfortable lending at term to financials."

Mr. Geithner sums up what needs to happen.

The Fed removes the size limits on its swap lines with the European Central Bank, as well as with the centralanks of Switzerland, Japan and the Britain. Federal Reserve Board Press Release

Oct. 11

The government summons the chief executives of nine large banks to Washington, where they are told that theywill be bailed out. With the talk of a bank rescue package in the United States, and central banks around the worldinally moving more aggressively and in concert, Wall Street begins to rally. The Dow Jones industrial averagesumps 936 points, or 11 percent, the largest one-day gain since the 1930s. Overseas markets also surged.

U.S. Investing $250 Billion in Banks

Oct. 13

By late October, the worldwide depth and impact of the crisis has become apparent to all, and the decision to letLehman fail is drawing intense criticism in Europe in particular.Oct. 29

SCHEDULED MEETING The F.O.M.C. cuts rates by another 50 basis points to 1 percent. The pacef economic activity appears to have slowed markedly," it says. The committee alsouthorizes a new round of swap lines with New Zealand, Brazil, South Korea, Mexico andingapore.

Oct. 29

Mr. Bernanke, the Fed chairman, argues at the F.O.M.C. meeting that American policy makers have essentiallyone the best they could under the circumstances.
http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.federalreserve.gov/newsevents/press/monetary/20081013a.htmhttp://www.nytimes.com/2008/10/14/business/economy/14treasury.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271http://www.nytimes.com/2008/10/14/business/economy/14treasury.htmlhttp://www.federalreserve.gov/newsevents/press/monetary/20081013a.htmhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1103http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1097


12/15



MR. BERNANKE: So given the fog of war which has, of course, been intense going back formore than a year I would defend what weve done in terms of the general direction,acknowledging that execution is not always perfect and that communication is not alwaysperfect.

MR. GEITHNER: Look particularly at the damage to confidence created by the Congresssactions in the weeks after the legislation was first proposed.

Within the privacy of the F.O.M.C. meeting, Mr. Geithner places some blame on Congress for making matters

worse. He is presumably referring to the Houses vote against the Troubled Asset Relief Program at the end of eptember. Congress approved the program a few days later. But Mr. Geithner says the initial vote hurt.

MR. GEITHNER: But please be very careful, certainly outside this room, about adding to theperception that the actions by this body were a substantial contributor to the erosion inconfidence. I think that Don Kohn said it best. The whole framing, which seems to havehardened now, that the world ended with the Lehman bankruptcy is just deeply unfair to the basic truth.

At the same meeting, Mr. Geithner presses other committee members to watch their words when talking about the

eds actions.

MS. YELLEN: We are fighting an uphill battle against falling home prices, an economy inrecession and collapsing confidence. It is not clear whether these steps will reopen creditflows to households and businesses, especially those with less than sterling credit.

Ms. Yellen also offers her views on the government bailouts. While she says she strongly supports the efforts torop up the banking system, she adds that it is not nearly enough. In tune with many critics of the governmentailouts, Ms.Yellen says ordinary Americans also need help.

MS. YELLEN: Given the seriousness of the situation, I believe that we should put as muchstimulus into the system as we can as soon as we can.

At a time when many at the Fed are wary of stimulus packages, Ms. Yellens concerns lead her to argue for more:
http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1191http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1191http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1191http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1191http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1193http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1193http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1193http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1193http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1193http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1193http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1193http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1191http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1191http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1191http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1191http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1191http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1266http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1271


13/15



NOVEMBER DECEMBER

Start of a New EraWith the financial system on life support although not yet stabilized the Fed begins to turn its attention tohe longer-term project of reviving the economy. It inaugurates the two strategies that remain at the core of that

ffort more than five years later, reducing short-term interest rates nearly to zero and starting to pile up mortgageonds and Treasuries.

Executives of Ford, General Motors, and Chrysler testify before Congress, requesting access to TARP for federaloans. Detroit Chiefs Plead for Aid

Nov. 18

The Treasury Department, Federal Reserve Board and F.D.I.C. announce an agreement with Citigroup to providepackage of guarantees, liquidity access and capital. Citigroup to Halt Dividend and Curb Pay

Nov. 23

The Fed announces it will buy up to $100 billion in debt issued by Fannie Mae and Freddie Mac, and up to $500illion in securities issued by the two companies, as it seeks to halt the collapse of the housing finance system.ederal Reserve Board Press Release

Nov. 25

The Fed's loans to foreign central banks peak at $580 billion.Dec. 10

The Business Cycle Dating Committee of the National Bureau of Economic Research announces that the economyas been in a recession since December 2007. National Bureau of Economic Research

Dec. 11

SCHEDULED MEETING The F.O.M.C. announces that it will reduce its benchmark interest rate toero for the first time since the Great Depression. The move exhausts the Fed's primary

means of stimulating the economy, and it immediately begins to experiment with a newpproach, declaring its intent to keep rates near zero "for some time."

Dec. 16

MR. BERNANKE: As you know, we are at a historic juncture both for the U.S. economy andfor the Federal Reserve. The financial and economic crisis is severe despite extraordinary efforts not only by the Federal Reserve but also by other policy makers here and around the world. With respect to monetary policy, we are at this point moving away from the standardinterest rate targeting approach and, of necessity, moving toward new approaches.

With the real economy buckling and signs of free-fall in evidence, policy-makers, at the final meeting of the year,egin to contemplate cutting short-term interest rates to what they term the zero bound. Mr. Bernankecknowledges the usual policies that worked in the past arent working in fact, this time is so different that a new

pproach is needed.
http://www.nytimes.com/2008/11/19/business/19auto.htmlhttp://www.nytimes.com/2008/11/24/business/24citibank.html?ref=businesshttp://www.federalreserve.gov/newsevents/press/monetary/20081125b.htmhttp://www.nber.org/cycles/dec2008.htmlhttp://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302http://www.nber.org/cycles/dec2008.htmlhttp://www.federalreserve.gov/newsevents/press/monetary/20081125b.htmhttp://www.nytimes.com/2008/11/24/business/24citibank.html?ref=businesshttp://www.nytimes.com/2008/11/19/business/19auto.html


14/15



MR. BULLARD: "Do we know? Was there something like a junk market in the Great Depressionthat we can compare this with?"

MR. DUDLEY: "Well, there were certain leveraged utility companies that you could argue werepretty junky."

MR. FISHER: "Corporate grade became junk in the Great Depression."

MR. BERNANKE: "Michael Milken hadnt been born yet." [Laughter]

While the macroeconomic outlook remains gloomy, there is still room for humor as policy makers discuss thempact of the crisis on high-yield bonds, and whether experts can look to the Great Depression as a guide. Cue aeference to Michael Milken, widely cited for popularizing so-called junk bonds on Wall Street in the 1980s, butltimately jailed for securities violations.

MR. BERNANKE: "I think we all agree that getting the right policies for the U.S. economy is thetop priority and, whatever we do, we need to find a way to get the right policies in place.Frankly, I think the best way to achieve that I am going to talk about some details isthrough operating in good faith. If we work together and keep each other apprised of

developments and our views, we will be able to make this work. If we take too narrow anapproach, too legalistic an approach, I think it will be much more difficult."

Mr. Bernanke also acknowledges that buying up assets the so-called policy of quantitative easing raises issuesf how the Fed is managed and will probably be controversial. It would remain so in 2014.

MR. BERNANKE: "Given the state of confidence in the markets and in the economy, I hope

whatever disagreements we may have that as much as possible we can keep them within these walls. With respect to the public, we need, as much as possible, to communicate a clearstrategy going forward."

Mr. Bernanke also knows it will be critical to communicate with the public, something the Fed hasn't done well inhe past.
http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1310http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1310http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1310http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1310http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1310http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1310http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1310http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1310http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1310http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1310http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1310http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1307http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1293http://www.nytimes.com/interactive/2014/02/21/business/economy/fed-transcripts-docviewer.html#p1302


15/15

the fed’s actions in 2008_ what the transcripts

Documents