The Conservative Cave
Current Events => Political Ammunition => Topic started by: Chris_ on August 08, 2012, 09:26:57 AM
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Fed study says Bush and the banks didn’t cause the Great Recession. The Fed did.
President Obama argues that it was the unchecked, reckless, casino capitalism of the George W. Bush years — bank deregulation, tax cuts for the rich — that lead to the nation’s worst economic downturn since the Great Depression. And if Mitt Romney is elected in November, the Republican will bring those policies right back, risking another financial collapse.
But a book by Robert Hetzel, a senior economist at Federal Reserve Bank of Richmond, says it wasn’t Bushonomics or greedy bankers or broken markets that caused the Great Recession. In The Great Recession: Market Failure or Policy Failure, Hetzel pins the blame squarely on the Federal Reserve and Team Bernanke.
"A moderate recession became a major recession in summer 2008 when the [Federal Open Market Committee] ceased lowering the federal funds rate while the economy deteriorated. The central empirical fact of the 2008-2009 recession is that the severe declines in output that in appeared in the [second quarter of 2008 and the first quarter of 2009] … had already been locked in by summer 2008."
American Enterprise Institute (http://www.aei-ideas.org/2012/08/fed-study-says-bush-and-banks-didnt-cause-the-great-recession-the-fed-did/)
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There's a reason that it's called economic policy.
Bad policies lead to bad decisions which often lead to calamity. Any systems analyst will tell you that.
As it's the Fed's job to direct monetary policy in the first place, the logical place to look is there first. While the big banks like Lehman certainly have a role to play, placing blame squarely on them laughs in the face of looking at your overall system first, before scapegoating banks and other financial institutions.