In FED We Trust, page 33
15 “U.S. Helps Lehman” David Cho, Heather Landy, and Neil Irwin, “U.S. Helps Lehman Go Up for Sale; Regulators Are Seeking a Weekend Deal Not Involving Public Money,” Washington Post, September 12, 2008, A1.
15 “For market discipline” Henry Paulson, “Remarks on the U.S., the World Economy and Markets before the Chatham House,” London, July 2, 2008. http://treas.gov/press/releases/hp1064.htm
18 “If we’re going to do” Susanne Craig, Jeffrey McCracken, Aaron Lucchetti, and Kate Kelly, “The Weekend That Wall Street Died — Ties That Long United Strongest Firms Unraveled as Lehman Sank Toward Failure,” Wall Street Journal, December 29, 2008, A1.
18 Thain tried: Bank of America Corp, Form DEFM14A, November 3, 2008.
19 “We are not going” Interviews, Treasury staff.
20 Barclays later bought: http://www.barcap.com/ static/BarCap/Press%20office/Attached%20Document/ Lehman_Press_Release_170908.pdf _acquisition.pdf
22 “I never once considered” Transcript at http://georgewbush-whitehouse.archives.gov/ news/releases/2008/09/20080915-8.html
23 Paulson said months later: Interview, Henry Paulson.
23 “In the case of Lehman Brothers” House Financial Services Committee, hearing, September 24, 2008.
23 “Everything fell apart” Alan Blinder, “Six Errors on the Path to the Financial Crisis,” New York Times, January 25, 2009. http://www.nytimes.com/2009/01/25/business/ economy/25view.html?ref=business
24 “You don’t want to say” Interview, Henry Paulson.
25 “We could have saved it” Interview, October 2008.
26 “A disorderly failure of AIG” House Committee on Financial Services, hearing, September 24, 2008. www.house.gov/financialservices/hearing110/hr092408.shtml
26 “The national commitment” Damian Paletta, “Barney Frank Celebrates Free Market Day,” Real Time Economics, September 17, 2008. http://blogs.wsj.com/economics/2008/09/17/barney-frank-celebrates-free-market-day
CHAPTER 2: “PERIODICAL FINANCIAL DEBAUCHES”
28 The opening years: John Steele Gordon, An Empire of Wealth: The Epic History of American Economic Power (New York: HarperCollins, 2004), 277.
28 Campaigning to end: Robert F. Bruner and Sean D. Carr, The Panic of 1907: Lessons Learned from the Market’s Perfect Storm (Hoboken, N.J.: John Wiley & Sons, 2007), 9.
28 “God made the world” Gordon, 262.
28 “War was fresh in mind” Bruner and Carr, The Panic of 1907, 13.
29 “the idle holders” William Jennings Bryan, “Bryan’s ‘Cross of Gold’ Speech: Mesmerizing the Masses,” July 9, 1896, from History Matters Web site http://historymatters.gmu.edu/d/5354
30 “agrarian antipathy for city” Bray Hammond, Banks and Politics in America from the Revolution to the Civl War (Princeton, N.J.: Princeton University Press, 1957), 33.
30 “I sincerely believe” Thomas Jefferson, “Money & Banking,” 1816, from Thomas Jefferson on Politics & Government Web site http://etext.virginia.edu/jefferson/quotations/jeff1325.htm
30 more than one a decade: Charles W. Calomiris and Gary Gorton, “The Origins of Banking Panics: Models, Facts, and Bank Regulation,” in R. Glenn Hubbard, ed., Financial Markets and Financial Crises, 1991, Table 4.1, 114. http://www.nber.org/chapters/c11484.pdf
30 an elaborate allegory: Ranjit S. Dighne, The Historian’s Wizard of Oz: Reading L. Frank Baum’s Classic as a Political and Monetary Allegory (New York: Praeger, 2002).
31 Never mind that: Bruner and Carr, 84.
32 JP Morgan Chase’s decision: Carrick Mollenkamp et al., “The Two Faces of Lehman’s Fall — Private Talks of Raising Capital Belied Firm’s Public Optimism,” Wall Street Journal, October 6, 2008, A1.
32 On Monday, October 21: Federal Reserve Bank of Boston, “Panic of 1907,” 12. http://www.bos.frb.org/about/pubs/panicof1.pdf
32 “he had added several” Bruner and Carr, 109, citing New York Times, October 24, 1907.
33 “I remember Mr. Morgan” Bruner and Carr, 87-88, from Strong 1924 letter to Thomas W. Lamont (see reference on p. 222 of Bruner and Carr).
33 “what was probably the most extensive” Quoted in Gary Gorton, “The Panic of 2007,” 2. Federal Reserve Bank of Kansas City, Jackson Hole Conference, August 2008. http://www.kc.frb.org/PUBLICAT/SYMPOS/2008/ gorton.08.04.08.pdf
34 Commodity prices fell: Bruner and Carr, 142.
34 Some 240 banks failed: Allan H. Meltzer, A History of the Federal Reserve, Volume 1:1913 — 1951 (Chicago: University of Chicago Press, 2004), 65.
34 “Crowds cheered when” Howard Means, Money & Power: The History of Business (Hoboken, N.J.: John Wiley & Sons, 2001), 142.
34 “Something has got to be done” Andrew Sinclair, Corsair: The Life of J. Pierpont Morgan, 1981, 226, cited in Ron Chernow, House of Morgan (New York: Grove Press, 2001), 128.
35 “What is wanted” Walter Bagehot, Lombard Street (Homewood, Ill.: Richard D. Irwin, 1962), 31-32.
37 “The Panic of 1907” William Greider, Secrets of the Temple (New York: Simon & Schuster, 1987), 274.
37 “While most bankers” Roger T. Johnson, Historical Beginnings … The Federal Reserve, Federal Reserve Bank of Boston, 18. http://www.bos.frb.org/about/pubs/begin.pdf
38 “The whole world is united” Bruner and Carr, 145.
38 “in complete control of everything” Johnson, 19.
38 “a great and growing concentration” Bruner and Carr, 148.
38 “impossible another panic” Howard M. Hackley, Lending Functions of the Federal Reserve Banks: A History, Board of Governors of the Federal Reserve System, 1973, 10.
39 “Americans still maintain” Hammond, 122
40 “He regarded the twelve” Meltzer, 76.
41 “an incredibly dramatic” Ben S. Bernanke, Essays on the Great Depression (Princeton, N.J.: Princeton University Press, 2004), viii, 8.
41 “That went on for three” “Fed Chairman’s Q&A on Financial Crisis,” Wall Street Journal, October 16, 2008. http://online.wsj.com/article/SB122409761899937343.html
41 “To understand the Great Depression” Bernanke, Essays, 5.
41 “Not only have we” Quoted in Greider, 298.
42 He prevailed: Ben Bernanke, “On Milton Friedman’s Ninetieth Birthday,” Federal Reserve Board, November 8, 2002. http://www.federalreserve.gov/boarddocs/speeches/ 2002/20021108/default.htm
42 “The monetary policy” “Fed Chairman’s Q&A.”
42 “important not primarily” Milton Friedman and Anna Jacobson Schwartz, A Monetary History of the United States (Princeton, N.J.: Princeton University Press, 1963), 352.
43 “expensive and difficult to obtain” Bernanke, Essays, 42.
43 Nearly half the banks: Ibid., 44.
43 “Thus, expectation of failure” Ibid., 45.
44 “The widespread banking panics” Ben S. Bernanke, “The Financial Accelerator and the Credit Channel,” from Board of Governors of the Federal Reserve System Web site, June 5, 2007. http://www.federalreserve.gov/newsevents/speech/ Bernanke20070615a.htm
45 That was more than double: Bernanke, Essays, 54.
45 Exactly the same: Comparison of Ten-Year Treasury to Moody’s Seasoned Baa Corporate Bond Yield, from http://research.stlouisfed.org/fred2
46 $185 billion of which: Douglas W. Elmendorf, Congressional Budget Office, March 2, 2009. http://www.cbo.gov/ftpdocs/100xx/doc10008/03-02-Macro_Effects_of_ARRA.pdf
46 “In one camp” Lawrence H. White, “Did Hayek and Robbins Deepen the Great Depression?” Journal of Money, Credit and Banking 40(4), 751 — 768. http://economics.sbs.ohio-state.edu/jmcb/ jmcb/07056/07056.pdf
47 “with the operation” Jeremy Atack and Peter Passel, A New Economic View of American History from Colonial Times to 1940 (New York: W. W. Norton & Company, 1994), 614.
47 Only a minority of Fed: David M. Kennedy, Freedom from Fear: The American People in Depression and War, 1929 — 1945 (New York: Oxford University Press, 1999), 70 — 104.
47 “believed with me” Herbert Hoover, The Memoirs of Herbert Hoover: The Great Depression, 1929 — 1941 (New York: Macmillan, 1952), 31 — 32.
48 “After Strong’s death” Bernanke, “On Milton Friedman’s Ninetieth Birthday.”
48 “a weak reed” Meltzer, 413.
48 “I optimistically think that” Randall Parker, The Economics of the Great Depression: A Twenty-First Century Look Back at Economics of the Interwar Era (Northampton, Mass.: Edward Elgar, 2007), 67. http://www.ecu.edu/cs-educ/econ/upload/Ben_Bernanke.pdf
48 “Regarding the Great Depression” Bernanke, “On Milton Friedman’s Ninetieth Birthday.”
48 “We may look” “A Great Financier,” New York Times, April 1, 1913, 10. http://query.nytimes.com/gst/abstract.html?res=9807E1DD1F3AE633A25752C0A9629C946296D6CF
CHAPTER 3: AGE OF DELUSION
50 only the third time: Press release, Board of Governors of the Federal Reserve System, February 3, 2006. http://www.federalreserve.gov/newsevents/press/other/ 20060203b.htm
50 “Alan Greenspan is perhaps” The White House, “President Attends Swearing-In Ceremony for Federal Reserve Chairman Ben Bernanke,” February 6, 2006. http://georgewbush-whitehouse.archives.gov/news/releases/2006/02/ 20060206.html
51 Bernanke’s Dashboard: From publicly available sources. Price of oil is spot price for West Texas Intermediate Crude. Unemployment is latest available on date shown. Financial stress indicator is spread between London Interbank Offered Rate (LIBOR) and overnight indexed swaps.
51 During the 2000: Joshua Cooper Ramo, “After Greenspan: The Taylor Rule?” Time, February 26, 2001. http://www.time.com/time/magazine/article/ 0,9171,999303,00.html
51 Richard Fisher: Personal communication, Richard Fisher.
52 “Jim Baker didn’t” Bob Woodward, Maestro (New York: Simon & Schuster, 2000), 19.
52 “How did my Jewish uncle” Robert B. Reich, Locked in the Cabinet (New York: Alfred A. Knopf, 1997), 80.
53 “No one has yet” Alan Blinder and Ricardo Reis, “Understanding the Greenspan Standard,” Federal Reserve Bank of Kansas City, Jackson Hole Conference, August 2005. www.kc.frb.org/PUBLICAT/SYMPOS/2005/pdf/ BlinderReis.paper.0804.pdf
55 A week after Hurricane Katrina: Greg Ip and Mark Whitehouse, “Awash in Cash: Cheap Money, Growing Risks — Stash Flow: Huge Flood of Capital to Invest Spurs World-Wide Risk Taking — Corporate and Foreign Savings Chase Assets, Driving Prices Up, Keeping Returns Low — ’A Global Game of Chicken,’” Wall Street Journal, November 3, 2005, A1.
56 Australia’s biggest homegrown: Patrick Barta and Mary Kissel, “Awash in Cash: Cheap Money, Growing Risks — Buying Bridges: From Australia, Money Chases Roads, Airports Around Globe — Forced-Savings Plan Creates Big War Chest That Banks Match Up with Projects — Macquarie Bails Out Chicago,” Wall Street Journal, December 6, 2005, A1.
56 An investment partnership: E. S. Browning, “Awash in Cash: Cheap Money, Growing Risks — Woodland Haven: U.S. Timberland Gets Pricey as Big Money Seeks Shelter — Rush Reflects Glut of Capital, Low Payoff on Other Assets; Sold: 5% of State of Maine — But Do Trees Grow to the Sky?” Wall Street Journal, November 4, 2005, A1.
56 “The most severe” Charles W. Calomiris, “The Subprime Turmoil: What’s Old, What’s New and What’s Next,” Jackson Hole, Wyoming, October 2, 2008. http://www.kc.frb.org/publicat/sympos/2008/ Calomiris.08.20.08.pdf
57 “make sense tactically” Transcript, FOMC meeting, June 24-25, 2003.http://www.federalreserve.gov/ monetarypolicy/fomchistorical2003.htm
57 “It was like someone” “Outspoken: A Conversation with Nassim Nicholas Taleb,” Washington Post, March 15, 2009, B2.
58 “an eventual crisis” William R. White, “Is Price Stability Enough?” Bank for International Settlements, April 2006. http://www.bis.org/publ/work205.pdf
58 “We tried in 2004” Greg Ip and Jon Hilsenrath, “Debt Bomb: Inside the Subprime Mortgage Debacle,” Wall Street Journal, August 7, 2007, A1.
58 “I will stipulate” Transcript, FOMC meeting, August 12, 2003. http://www.federalreserve.gov/monetarypolicy/ fomchistorical2003.htm
59 the Wall Street Journal: “WSJ Forecasting Survey — March 2008,” Wall Street Journal. http://online.wsj.com/public/resources/documents/ wsjecon0308.xls
59 A 2004 Fed working paper: Joshua Gallin, “The Long-Run Relationship between House Prices and Rents,” Board of Governors of Federal Reserve System, September 2004. http://www.federalreserve.gov/pubs/feds/2004/200450/ 200450pap.pdf
59 “I would tell audiences” Alan Greenspan, The Age of Turbulence: Adventures in a New World (New York: Penguin Press, 2007), 232.
60 “We cannot practice” Transcript, Federal Reserve Bank of Kansas City, Jackson Hole Conference, August 2008. http://www.kc.frb.org/PUBLICAT/SYMPOS/1999/ sym99prg.htm
61 “He didn’t say anything” John Cassidy, “Anatomy of a Meltdown,” The New Yorker, December 1, 2008. http://www.newyorker.com/reporting/2008/12/01/ 081201fa_fact_cassidy?currentPage=all
61 “The biggest bubble” Alan S. Blinder and Ricardo Reis, “Understanding the Greenspan Standard,” Federal Reserve Bank of Kansas City, Jackson Hole Conference, August 2005. http://www.kc.frb.org/publicat/sympos/2005/pdf/ blinderreis.paper.0804.pdf
61 “persistent and ultimately” Phil Izzo, “Volcker Supports Popping Bubbles, Regulating Hedge Funds,” Real Time Economics, February 26, 2009. http://blogs.wsj.com/economics/2009/02/26/volcker-supports-popping-bubbles-regulating-hedge-funds
61 “Mopping up after” John Gieve, “Seven Lessons from the Last Three Years,” speech delivered February 19, 2009.
62 “In the subprime market” Edward M. Gramlich, “Booms and Busts: The Case of Subprime Mortgages,” Federal Reserve Bank of Kansas City, Jackson Hole Conference, August 2007. http://www.kc.frb.org/ publicat/sympos/2007/pdf/Gramlich_0415.pdf
63 “He was opposed to it” Greg Ip, “Did Greenspan Add to Subprime Woes? Gramlich Says Ex-Colleague Blocked Crackdown on Predatory Lenders Despite Growing Concerns,” Wall Street Journal, June 9, 2007, Bl.
63 “I told him” “‘The Impact Was Larger Than I Expected’: Greenspan’s Chats with the Journal,’” Wall Street Journal, April 8, 2008. http://online.wsj.com/article/SB120759233667695449.html#
64 “planned to be largely passive” Greenspan, Turbulence, 373.
64 “It is effective” Alan Greenspan, letter to John J. LaFalce, May 30, 2002.
65 “I made a mistake” House Committee on Oversight and Government Reform, hearing, October 23, 2008. http://oversight.house.gov/story.asp?id=2256
CHAPTER 4: THERE ARE JEWS IN BOSTON, TOO
68 “The Fed needs” Ben S. Bernanke, Frederic S. Mishkin, and Adam S. Posen, “What Happens When Greenspan Is Gone?” Wall Street Journal, January 5, 2000, A22. 68 “That’s the one thing” Interview, Ben Bernanke.
68 Bernanke was a clue: New York Times crossword puzzle, November 12, 2008, 21-Across. Personal communication with Bob Klahn.
68 “Cause of difficulty” “Shuffled Cards,” New York Sun, August 24, 2007, 34-Across. http://www.nysun.com/crosswords/subscriber_puzzle.php
69 tobacco town of 6,400: S.C. Budget and Control Board, “Office of Research & Statistics, Population 1950-2000 Cherokee, Chester, Chesterfield, Clarendon, Colleton, Darlington, Dillon,” from South Carolina Population Reports Web site http://www.ors2.state.sc.us/population/pop03c.asp
69 “In Dillon” Ben S. Bernanke, “Chairman Ben S. Bernanke National and Regional Economic Overview at the Presentation of the Citizen of the Carolinas Award,” from Board of Governors of the Federal Reserve System Web site, November 29, 2007. http://www.federalreserve.gov/ newsevents/speech/bernanke20071129a.htm
69 the comic book section: Ben S. Bernanke, “Chairman Ben S. Bernanke at the Presentation of the Order of the Palmetto, Dillon, South Carolina,” from Board of Governors of the Federal Reserve System Web site, September 1, 2006. http://www.federalreserve.gov/newsevents/speech/ Bernanke20060901a.htm
69 “Grandma, why don’t you teach” Phil Izzo, “Bernanke Advises Going Long on Blintzes,” Real Time Economics, December 3, 2007. http://blogs.wsj.com/economics/2007/12/03/bernanke-advises-going-long-on-blintzes
70 “One of his teachers” Greg Ip, “Banker in Chief: Bernanke Is Named to Lead the Fed — Ex-Academic Is Expected to Focus on Inflation, Not on ‘Asset Bubbles’ — Stock Investors Cheer the Pick,” Wall Street Journal, October 25, 2005.
70 “UNC-Chapel Hill” Interview, Ben Bernanke.
70 “I assured them” Interview, Kenneth Manning.
70 “was the superstar” Michael M. Grynbaum, “At Harvard, They Hail a Fed Chief,” New York Times, June 5, 2008, 1.
71 Pedro’s South of the Border: Bernanke, “Chairman Ben S. Bernanke at the Presentation of the Order of the Palmetto.”
71 “Ben Bernanke Interchange” H. 4600, South Carolina General Assembly, 117th session. www.scstatehouse.gov/sess117_2007-2008/bills/4600.doc
72 “It’s just a great sense” Michael Phillips, “Fed Chief’s Boyhood Home Is Sold after Foreclosure,” Wall Street Journal, February 15, 2009, A1.
72 “He wasn’t a prima donna” Interview, Stanley Fischer. 72 “My first reaction” Interview, Mark Gertler.
75 how the trio: Time, February 15, 1999. http://www.time.com/time/covers/0,16641,19990215,00.html
76 “Fix the roof” Bernanke et al. “What Happens When …”
76 “All I had in mind” Interview, Ben Bernanke.
76 Research Papers in Economics database: University of Connecticut: IDEAS Repec. “Top 5% Authors as of December 2008,” December 2008. http://ideas.repec.org/top/top.person.nbcites.html
76 “On the administrative side” Ben S. Bernanke, “Remarks by Governor Ben S. Bernanke at the Annual Meeting of the American Economic Association, Philadelphia, Pennsylvania: The Transition from Academic to Policymaker,” January 7, 2005. http://www.federalreserve.gov/boarddocs/speeches/ 2005/20050107/default.htm
