It's Out Of Bernanke's Reach
This is the title of an article appearing on page 36 of the September 3, 2007 edition of BusinessWeek magazine.
By cutting the largely symbolic discount rate on August 17, the Federal Reserve hoped to calm nerves and return borrowing conditions to normal. Instead, conditions got worse.
A reliable measure of panic - the difference in yields between safe and less-safe securities - widened to the biggest gap in more than 10 years. Five days later, markets remained severely impaired.
Why didn't Chairman Bernanke's script play as well as many hoped, at least in the early going? Simply put, the Federal Reserve did not - and cannot - fix the problem at the root of the market crisis. That problem is a lack of crucial information.
The lending mistakes of the past several years were too serious to be fixed by a quick rewrite at the Fed. The best the chairman can do is tide the economy over until lenders sort out their mistakes and gather the crucial information they neglected the first time.
* * * * *
By cutting the largely symbolic discount rate on August 17, the Federal Reserve hoped to calm nerves and return borrowing conditions to normal. Instead, conditions got worse.
A reliable measure of panic - the difference in yields between safe and less-safe securities - widened to the biggest gap in more than 10 years. Five days later, markets remained severely impaired.
Why didn't Chairman Bernanke's script play as well as many hoped, at least in the early going? Simply put, the Federal Reserve did not - and cannot - fix the problem at the root of the market crisis. That problem is a lack of crucial information.
The lending mistakes of the past several years were too serious to be fixed by a quick rewrite at the Fed. The best the chairman can do is tide the economy over until lenders sort out their mistakes and gather the crucial information they neglected the first time.
* * * * *
posted by Bob Moser at
6:52 PM
0 Comments:
Post a Comment
<< Home