While the Fed has been more transparent over the last several years than in the past, mostly due to the controversial methods it has employed, the actual transcripts of meetings are released on a five year delay.
Earlier today, the full transcripts of the eight scheduled meetings and three emergency sessions in 2007 were posted to the Federal Reserve’s web site.
While there have been a copious number of postmortem reports and plenty of analysis across the entire spectrum of media, this is our first official glimpse into deliberations during the early stages of the crisis.
The documents will allow us to gain a better understanding of what Ben Bernanke and the Fed board knew, when it knew it and how it came to take such unorthodox actions that have become the template for central banks worldwide.
Of particular interest will be the discussions of the subprime mortgage market that crashed shortly after Bernanke testified that, “Problems in the subprime mortgage market seem likely to be contained.”
Another topic to follow will be the extraordinary efforts to prop up banks. In the early stages of the crisis, Fed officials tried to separate the problems emerging in the global banking system from the risks to the U.S. economy.
On Aug. 17, 2007, a huge cut in the “discount rate” of emergency lending to banks was enacted to try to isolate developing problems in bank funding markets. By December, the Fed was pumping billions into the banking system through the “Term Auction Facility,” which greatly reduced the rate and acceptable collateral for 28 and 84 day short-term loans.
The discussions regarding the bank bailout schemes should show serious dissent within the board meetings over what to do as banks came dangerously close to insolvency.
At the time, Timothy Geithner was the New York Fed president. In that position, he led the charge for the bank bailout efforts against other board members. Richmond Fed president Jeffrey Lacker in particular is known to have resisted the extreme intervention measures and wanted to let the markets sort out the consequences for the reckless actions of banks and financial institutions.
The full transcripts are available on the Fed’s web site here.
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