Aug. 10, 2007, 8:45 a.m.Fed Chairman Ben Bernanke held an emergency meeting to inform FOMC members that the central bank would be issuing a statement later in the day to say that it would provide liquidity to maintain "orderly functioning" of the financial markets. "As you know, financial markets have been fragile," Bernanke said. "They appeared to continue to be fragile overnight. There are difficulties with commercial paper funding and other short-term funding and a lot of concerns about counterparty risk." Bernanke then turned to New York Fed President William Dudley, then the manager of the System Open Market Account, who revealed that two troubled companies were driving the market's uncertainty: Washington Mutual and Countrywide (now part of Bank of America ( BAC)). Also stoking fears was pressure on commercial paper markets in Europe and the U.S. "Washington Mutual and Countrywide have both made statements in their 10-Q filings that unnerved the market a little, Washington Mutual saying that they're having some trouble in terms of liquidity and Countrywide saying that there are unprecedented disruptions in the credit market," Dudley said. Worries about these two companies, according to the conversations, hadn't yet prompted concerns that other financial institutions were beginning to feel the pressure. Treasury Secretary Timothy Geithner, then the vice chairman of the FOMC and New York Fed president, chimed in to reassure members that the "more diversified" institutions had reported no funding pressure and that money actually was flowing to them. "That, of course, could change quickly," Geithner said. "But apart from those that are more narrowly in the mortgage market that can't basically sell any non-agency products, I don't think we're seeing any sense of funding pressure."
"I have talked to the heads of almost every single one of these firms in the last 72 hours, andHere's that video: -- Written by Joe Deaux in New York. >Contact by Email. Follow @JoeDeaux
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."