This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Transcripts Show Fed Underestimated Crisis In 2007

A week later, the Fed held an emergency meeting to cut its "discount rate" â¿¿ the rate it charges on emergency loans to banks. Then in September, the Fed cut its key short-term interest rate for the first time since 2003 by one-half percentage point from 5.25 percent to 4.75 percent. The goal was to help ease loan rates throughout the economy. The Fed would cut the rate two more times in 2007 as the financial crisis worsened, leaving its target for short-term interest at 4.25 percent at the end of the year.

By the October meeting, Fed members expressed some relief that the crisis appeared to be contained, at least for the time being. Fed officials cited more stability in financial markets and solid growth in the July-September quarter for this belief.

Bernanke did acknowledge that there was "an unusual amount of uncertainty" surrounding the Fed's economic forecasts. But in summing up the views of the committee, Bernanke said that in the overall economy, "there is yet no clear sign of a spillover from housing."

At the December meeting, the Fed staff presented its economic forecasts for 2008 and 2009. Growth would slow in 2008, the staff predicted, but the economy would avoid a recession. And growth would rebound in 2009, it forecast.

Even while Bernanke voiced concerns about the lending market and the quality of real estate loans, he predicted at the December meeting that no major bank would fail.

"The result of this is that, although I do not expect insolvency or near insolvency among major financial institutions, they are certainly going to become more cautious."

During the same meeting, Fed economist Dave Stockton, speaking for the staff, said the forecasts sketched a "pretty benign picture" of the economy. He joked that the Fed staff had come up with the projections "unimpaired and on nothing stronger than many late nights of diet Pepsi and vending-machine Twinkies."

3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG

Markets

DOW 18,135.72 +38.82 0.21%
S&P 500 2,101.04 +2.51 0.12%
NASDAQ 4,982.8090 +15.6680 0.32%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs