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Inside the Fed's First Financial-Crisis Meeting; Cramer Was Right

Dudley offered a simple response: when things settle down and liquidity in markets improves.

Note: The Fed's two current monetary easing programs include $40 billion a month in open-ended, mortgage-backed securities purchases and $45 billion a month in open-ended, longer-term Treasury bond purchases.

"I think there's a lot of suspicion, both in the markets and elsewhere, that the effects of all that easing policy is having kind of diminishing returns," Plosser said in an interview with TheStreet on Jan. 16, 2013. "The benefits, if you will, are not as strong as they were at the height of the crisis."

The meeting then turned to concerns about Europe and whether institutions in the eurozone would be at significant risk of liquidity problems.

Atlanta Fed President Dennis Lockhart asked if there were any "analogs" to Countrywide and Washington Mutual in Europe. The answer to Lockhart's question revealed how unaware Fed members were of the gaping problems that would eventually cripple the U.S. financial system.

"I think there is a general sense that a lot of this subprime stuff ended up, as it has in the past, in institutions in Europe," Geithner responded. "So I assume that we have the risk ... b ut, again, we have no indication from any of our counterparts yet that any major institutions face a significant funding or solvency issue."

Geithner's was the final point made by a member during the first emergency meeting held by the FOMC in regards to the financial crisis.

Plosser asked Bernanke to repeat the statement to the committee. He did so.

The Fed released this statement on Aug. 10, 2007. It was the first in a string of emergency monetary-policy releases that for the coming years would grip Americans, financial markets and the rest of the world.

A few days before the Fed's first emergency meeting, TheStreet's Jim Cramer unloaded on Fed officials in the following remarks:

"I have talked to the heads of almost every single one of these firms in the last 72 hours, and Ben Bernanke has no idea what it's like out there. None. And Former St. Louis Fed. President Bill Poole has no idea what it's like out there. My people have been in this game for 25 years and they're losing their jobs, and these firms are going to go out of business, and he's nuts! They're nuts! They know nothing!... This is a different kind of market, and the Fed is asleep."

Here's that video:

-- Written by Joe Deaux in New York.

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