Fed won`t win any medals for early crisis response
Bloomberg is out with its first story on the 2008 Fed transcripts and the headline is, `Fed failed to see Lehman`s fallout for the economy, transcripts show`
I read through parts of the Sept 16 transcript and the inability of the FOMC to grasp the gravity of what was happening is a bit of a shock. The problem with data-driven academics running the Fed is that they can`t make a real-time decision, they have to wait until it filters through the data. Later, once the market slapped the Fed in the face a few times, they did an good job but comments like this won`t inspire confidence in the Fed on main street:
`I don`t think we`ve seen a significant change in the basic outlook` said Dave Stockton, the Fed`s top forecaster two days after Lehman declared bankruptcy.
Similar take from Hilsenrath and the WSJ headline is: Fed’s 2008 Transcripts Show Struggle to Grasp Magnitude of Crisis
“I think that our policy is looking actually pretty good,” Fed Chairman Ben Bernanke said of the level of interest rates at a closed-door Fed policy meeting on Sept. 16, 2008