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Friday, February 21

21st Feb - Special: FED 2008 Transcripts

Previously on MoreLiver’s:

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Like many people out there, I am eagerly awaiting the release of the full transcripts of the Fed's monetary policy meetings for 2008…I expect that the media will have a field day.

FOMC: Transcripts and Other Historical Materials, 2008FED

Help Us Read Through the Federal Reserve 2008 TranscriptsWSJ

The 2008 FOMC transcriptsalphaville / FT
And yes, the Fed was really, really concerned about Treasury fails in 2008alphaville / FT
Federal Reserve 2008 Transcripts: Full CoverageWSJ
The Federal Reserve on Friday released transcripts of 14 scheduled and emergency policy meetings it held in 2008, providing new details of discussions within the central bank as financial turmoil related to the housing bust escalated into a full-blown crisis threatening the financial system and the economy.

Federal Reserve 2008: A Timeline of Fed Actions and Financial Crisis EventsWSJ
Here's a timeline of key events and flash points at the Federal Reserve in 2008, with links to Wall Street Journal stories and related Fed documents.

Fed 2008 Transcripts Q1: Winter Wake-Up CallWSJ
Federal Reserve officials spent much of 2007 underestimating the trouble brewing in financial markets, but the transcripts show how they came to realize in early 2008 that they were facing a potentially serious crisis.

Fed 2008 Transcripts Q2: Spring LullWSJ
Fed transcripts released Friday shed light on the central bankers’ internal debates in the second quarter of 2008, when officials seemed less worried about the financial system but increasingly concerned about a potential spike in inflation. The March collapse of Bear Stearns was behind them, and the crisis days of September lay ahead and out of sight. “The worst is likely to be behind us,” Treasury Secretary Henry Paulson declared in May.

Fed 2008 Transcripts Q3: The Panic EruptsWSJ
Fed officials saw financial turbulence growing through the summer, erupting into a full-blown crisis in September, the transcripts show.

Fed 2008 Transcripts Q4: Whatever It TakesWSJ
After the crisis peaked in September, the months that followed were sometimes harrowing as well, the transcripts show.

Fed Transcripts Provide New Details on 2008 Fed Libor SuspicionsWSJ
A top Federal Reserve official told colleagues in April 2008 that he had doubt about whether banks were being honest in how they were calculating the Libor

Yellen in September-October 2008alphaville / FT
Janet Yellen was less worried than some of her FOMC colleagues in September 2008 that high inflation would remain a problem, and she was also more bearish on the economic outlook:

What Really Mattered To The Fed The Day After Lehman Collapsed, In Its Own WordsZH

Did The Fed Also Bail Out A Hedge Fund In The Crisis?ZH

Fed Failed to See Lehman’s Fallout for Economy, Transcripts ShowBB
The records show Fed officials struggling to understand the magnitude of the financial crisis that was underway, and the potential fallout for the economy.

Yellen Saw Economy at ‘Brink of Recession’ in January 2008BB
Janet Yellen saw the U.S. economy “at, if not beyond, the brink of recession” in January 2008, differing from the less gloomy view of Federal Reserve staff, according to transcripts of policy meetings released today.

Records show Fed on edge during darkest days of 2008 crisisReuters
Federal Reserve policymakers, in an emotional meeting on one of the darkest days of the 2008 financial crisis, were worried the failure of Lehman Brothers a day earlier would wreak havoc on a teetering financial system but feared cutting already low interest rates might prove an over-reaction.

The ‘best’ Fed jokes from the worst of the financial crisisQuartz

The Fed’s Actions in 2008: What the Transcripts RevealNYT

At Least The Fed Ended The Catastrophic 2008 On A Funny NoteNWO Stop

A Chronicle of Uncertainty, Then Bold Action, in 2008 Fed TranscriptsNYT

Bernanke on Japanese vs American monetary policy (or QE vs credit easing)alphaville / FT

Quantitative easing is an adaptation for when rates hit the zero lower bound that’s meant to closely mirror the normal functioning of monetary policy (interest rates down, lending up). Credit easing is meant to target the specific problems that would be immune to help from (normal) monetary policy.

Fed flying blindalphaville / FT
Given the release of the 2008 FOMC transcripts, the St Louis Fed has shrewdly tweeted a speech from last year by its president, James Bullard, arguing that the real-time economic data in 2008 was badly trailing events.

Fed Failed to See Lehman’s Fallout for Economy, Transcripts ShowBusinessweek
The day after Lehman Brothers Holdings Inc. declared the largest bankruptcy in U.S. history in 2008, Federal Reserve officials remained unsure whether the financial crisis would do lasting damage to the U.S. economy.

Metaphorically speaking: 5 turns of phrase from the transcriptsWSJ
Fed officials have a long history of spicing up their discussions of monetary policy with metaphors and analogies. Here are five of the most vivid turns of phrase from the Fed's 2008 transcripts.

2008 Transcripts: Boston Fed’s Rosengren Pressed for Early, Aggressive Crisis ResponseWSJ
Rosengren, a strong advocate of aggressive central bank action, emerges from 2008 Fed policy meeting transcripts as an early voice of alarm on the scope of the financial crisis that was building at the time.
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Is This The Moment The Fed Decided To Go All In?ZH
In December 2008, two brief conversations from Ms Yellen and Mr Bullard appear to have set the scene for both the scale and focus of the Fed's actions over the ensuing years... ironically it was Janet Yellen's fear of a "rising" labor force participation rate and Jim Bullard's rapid realization that the US was "moving to a Japanese-style deflationary, zero nominal interest rate, situation at an alarming pace."

How the Fed Saw a Recession, Then Didn’t, Then DidNYT
Bernanke Took Charge as Fed Awoke to Need for War on 2008 CrisisBB
In December 2008, Ben S. Bernanke, the self-effacing chairman of the Federal Reserve, declared war against a cascading recession that the Fed was late to see coming and took charge as general.

Graphic: Fed's Response to CrisisWSJ

Interactive: The Fed’s Actions in 2008: What the Transcripts RevealNYT

As Crisis Loomed, Yellen Made Wry and Forceful Calls for ActionNYT

Fed’s Aid in 2008 Crisis Stretched WorldwideNYT

FOMC 200820 cent paradigms
It is easy, with the benefit of hindsight, to criticize the committee members whose worries over inflation and optimism about the impact of the financial crisis look so foolish today (and this applies to some of the academic members, not just Fisher).  But looking at the data they had at the time underscores the fact that their task isn't so easy.