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One Thing We Learned from the Crisis

Posted in 2007-08 Financial Crisis, US politics

Ten years ago this month, the Federal Reserve Board made a mistake. By August 2007, when the research conference at Jackson Hole ended, insiders recognized that some sort of crisis had begun (the Bear Stearns sub-prime hedge funds, Bank Paribas, and all that).  So Federal Reserve Chair Ben Bernanke, FRB New York President Timothy Geithner, and Vice Chair Donald Kohn began discussing emergency measures. In the coming weeks, plans were drafted to offer troubled institutions short-term loans through auctions at “market rates,” instead of overnight loans at ominous “penalty rates.” The idea was to disguise the emergency nature of such