Menu
Share
Share this story
Close X
 
Switch to Desktop Site

Federal Reserve's 'astounding' report: We loaned banks trillions

Next Previous

Page 2 of 3

About these ads

Despite the public outrage stirred by the actions to prop up firms like Citigroup and AIG, the Fed's biggest mistakes may have come before the recession rather than in response to it.

"My view is that the Fed has done an excellent job since the crisis started, but they didn't do a very good job before the crisis started," says Pete Kyle, a finance expert at the University of Maryland. He says the central bank, as a key financial regulator, should have ensured that US banks had plenty of capital on hand to weather a storm.

Some other economists echo that view, arguing that the Fed and other bank regulators should have done much more to safeguard against a surge in high-risk mortgage lending during the years leading up to the crisis, at a time when US home prices were soaring.

Once a crisis is under way, however, the standard view among economists is that a central bank should act as a "lender of last resort," providing credit as freely as possible to prevent widespread bank failures at a time when ordinary investors are in a panic.

Even if the Fed's general approach was the correct one, Wednesday's data release is sure to prompt close analysis of the money lent, and who got it.

Sen. Bernie Sanders, a Vermont independent who led the charge for Fed transparency, characterized the new details as "astounding" and called for an investigation to determine whether banks borrowed at near-zero interest and then loaned money back to the government at higher rates.

Next Previous

Page:   1   |   2   |   3


Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.

Loading...