Mods forgive me if this is in the wrong area.
I recently read a NYT Op Ed by Geithner, Bernake and Paulson that discusses the PR disaster surrounding the 2007/08 financial crisis. It goes into state that during that time the FDIC acted quickly and best appropriately to prevent essentially a "bank run".
The argument is that currently we've lost some of the powers/tools we had back in 2008 to prevent this in the future..and I am confused as to what specifically/technically those powers/tools were that are no longer legislation?
https://www.nytimes.com/2018/09/07/opinion/sunday/bernanke-lehman-anniversary-oped.html
I now understand essentially the emergency lending powers and the outcome of blanket guarantees of bank debt are no longer available.
My question is sort of, "Why?" What was the reasoning for restraining the powers, when it seems to have worked so well. Is it simply due to public sentiment as they go on to discuss below?
Then I found a supporting article at the observer that explained a bit further... as it related to the general publics/voters' sentiment below...
https://observer.com/2018/09/ben-be...y-geithner-regret-pr-failures-of-2008-crisis/
“The hardest thing was sitting at the table with my wife in the morning with her reading about what I was doing, and just seeing on her face the mix of despair and doubt,” reflected Geithner. “I believe she felt that we were ethical people trying to do the right thing, but she looked at what we did and said ‘Really?’ That was mirrored by what we faced across the country and the gap between what we thought would provide the broadest benefit as far as possible, with what people thought was fair and just.”
BTW, that Hear no, see no, speak no evil pose by these three is CLASSIC! Thoughts from the Econ peasants?
I recently read a NYT Op Ed by Geithner, Bernake and Paulson that discusses the PR disaster surrounding the 2007/08 financial crisis. It goes into state that during that time the FDIC acted quickly and best appropriately to prevent essentially a "bank run".
The argument is that currently we've lost some of the powers/tools we had back in 2008 to prevent this in the future..and I am confused as to what specifically/technically those powers/tools were that are no longer legislation?
https://www.nytimes.com/2018/09/07/opinion/sunday/bernanke-lehman-anniversary-oped.html
'...we and other financial regulators did not foresee the crisis, we moved aggressively to stop it. Acting in its traditional role as lender of last resort, the Federal Reserve provided massive quantities of short-term loans to financial institutions facing runs, while cutting interest rates nearly to zero.
./.
'But in its post-crisis reforms, Congress also took away some of the most powerful tools used by the FDIC, the Fed and the Treasury. Among these changes, the FDIC can no longer issue blanket guarantees of bank debt as it did in the crisis, the Fed’s emergency lending powers have been constrained, and the Treasury would not be able to repeat its guarantee of the money market funds. These powers were critical in stopping the 2008 panic.'
I now understand essentially the emergency lending powers and the outcome of blanket guarantees of bank debt are no longer available.
My question is sort of, "Why?" What was the reasoning for restraining the powers, when it seems to have worked so well. Is it simply due to public sentiment as they go on to discuss below?
Then I found a supporting article at the observer that explained a bit further... as it related to the general publics/voters' sentiment below...
https://observer.com/2018/09/ben-be...y-geithner-regret-pr-failures-of-2008-crisis/
“The hardest thing was sitting at the table with my wife in the morning with her reading about what I was doing, and just seeing on her face the mix of despair and doubt,” reflected Geithner. “I believe she felt that we were ethical people trying to do the right thing, but she looked at what we did and said ‘Really?’ That was mirrored by what we faced across the country and the gap between what we thought would provide the broadest benefit as far as possible, with what people thought was fair and just.”
BTW, that Hear no, see no, speak no evil pose by these three is CLASSIC! Thoughts from the Econ peasants?
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