Federal Reserve's 2008 Transcripts: Five Takeaways; Documents Revealing Verbatim Remarks Offer Fresh Insights
The Federal Reserve on Friday released 1,865 pages of transcripts of its behind-closed-doors policy meetings in 2008, the year of the worst financial crisis in generations. The Fed announced the outcome of the meetings right after they occurred, and it released minutes summarizing the discussions a few weeks later. But these documents reveal for the first time officials' verbatim remarks during the heat of many difficult moments that year. Among the insights they provide:</br></br>1. The Fed was often behind the curve</br></br>"A perception has developed that we are tentative and indecisive," then-Chairman Ben Bernanke warned his colleagues in January 2008. At times, he moved aggressively to cut short-term interest rates; at others, he held back. After Lehman Brothers collapsed, he thought monetary policy, with short-term interest rates at 2%, was in the right place. By year-end, he acknowledged the Fed was at a "historic juncture" and moved aggressively to unconventional policies to avert another depression.</br></br>2. Janet Yellen's forecasting record was mixed</br></br>The current Fed chairwoman said in March 2008 that history would probably show a recession had started in November 2007. That was a good call: The National Bureau of Economic Research put the date at December 2007. Ms. Yellen is highly regarded for her ability to read the economy, but she also makes mistakes. In June 2008, she guessed the Fed's next move would be interest-rate increases to fight inflation before year-end. Instead, the Fed continued cutting rates through the year.