In FED We Trust (46 page)

238
“The terms had to be”
Swagel, 39.
http://www.brookings.edu/economics/bpea/∼/media/ Files/Programs/ES/BPEA/2009_spring_bpea_papers/ 2009_spring_bpea_swagel.pdf

241
In an interview:
James Fallows, “Be Nice to the Countries That Lend You Money,”
The Atlantic
, December 2008.
http://www.theatlantic.com/doc/200812/fallows-chinese-banker

242
Surveys of businesses:
Federal Reserve, “The Beige Book Summary,” January 14, 2009.
http://www.federalreserve.gov/ fomc/beigebook/2009/20090114/default.htm

243
“pragmatic enough”
“Remarks by Secretary Henry M. Paulson Jr. at the Ronald Reagan Presidential Library,” November 20, 2008.
http://www.treas.gov/press/releases/hp1285.htm

246
six of the twelve:
Federal Reserve, discount-rate meeting minutes.
http://www.federalreserve.gov/newsevents/ press/monetary/monetary20081125b1.pdf

247
Brian Madigan:
Jeffrey Fuhrer and Brian Madigan, “Monetary Policy When Interest Rates Are Bounded at Zero,” Working Paper 94-1, Federal Reserve Bank of Boston, 1994.

247
“A central bank”
FOMC minutes, January 29-30, 2002.
http://www.federalreserve.gov/boarddocs/speeches/ 2002/20021121/default.htm

247
When they briefed the FOMC:
Transcript,
http://www.federalreserve.gov/monetarypolicy/files/ FOMC20020130meeting.pdf

251
That balance sheet:
From U.S. Treasury, “U.S. International Reserve Position,” January 5, 2009,
http://www.treas.gov/press/releases/200915163047912.htm
; and Federal Reserve, “Factors Affecting Reserve Balances,” December 18, 2008,
http://www.federalreserve.gov/ releases/h41/20081218

253
“The impact of the totality”
Janet Yellen, “U.S. Monetary Policy Objectives in the Short and Long Run,” Federal Reserve Bank of San Francisco, January 4, 2009.
http://www.frbsf.org/news/speeches/2009/0104b.html

253
In September 2008:
Fed H.3 release.

254
“credit easing”
Ben S. Bernanke, “The Crisis and the Policy Response,” Federal Reserve Board, January 13, 2009.
http://www.federalreserve.gov/newsevents/speech/ bernanke20090113a.htm

254
“What justification is there”
John B. Taylor, “The Need to Return to a Monetary Framework,” January 2009.
http://www.stanford.edu/∼johntayl/NABE%20Business%20Economics%20Article%20-%20Taylor.pdf

255
“TALF shows us”
George A. Akerlof and Robert J. Shiller,
Animal Spirits
(Princeton, N.J.: Princeton University Press, 2009), 92.

256
“Will we face challenges”
Charles I. Plosser, “The Economic Outlook and Some Challenges Facing the Federal Reserve,” Federal Reserve Bank of Philadelphia, January 14, 2009.
http://www.philadelphiafed.org/publications/ speeches/plosser/2009/01-14-09_university-of-
delaware.cfm

257
“In a committee such as the FOMC”
Richard W. Fisher, “Responding to Turbulence (with Reference to Bob Dylan, Alan Brooke, Washington Irving, Anna Fisher and Marcus Nadler),” Federal Reserve Bank of Dallas, September 25, 2008.
http://www.dallasfed.org/news/speeches/fisher/ 2008/fs080925.cfm

258
“I felt after”
Interview, Richard Fisher.

258
“My colleagues”
Richard W. Fisher, “Historical Perspectives on the Current Economic and Financial Crisis,” Federal Reserve Bank of Dallas, December 18, 2008.
http://www.dallasfed.org/news/speeches/fisher/2008/ fs081218.cfm

260
“[T]hese were funds”
Kenneth Lewis memo, filed with Securities and Exchange Commission.
http://msnmoney.brand.edgar-online.com/EFX_dll/EDGARpro.dll?FetchFilingHTML1?1D=6274964&SessionID=txp3WohEzEop249

260
Over the weekend:
Testimony of Kenneth Lewis, “In Re: Executive Compensation Investigation, Bank of America-Merrill Lynch,” Office of the Attorney General, State of New York, February 26, 2009, p. 52.
http://www.oag.state.ny.us/media_center/2009/apr/ apr23a_09.html

261
“A vague letter”
Personal communication with Paulson spokeswoman.

261
“He said there was no way”
E-mail released by New York attorney general.
http://www.oag.state.ny.us/ media_center/2009/apr/apr23a_09.html

262
A few weeks later:
Bank of America Corporation Q4 2008 Earnings Call Transcript, January 16, 2008.
http://seekingalpha.com/article/115373-bank-of-america-corporation-q4-2008-earnings-call-transcript?page=-1

264
A few weeks later, Bernanke reflected:
Interview, Ben Bernanke.

265
“by far the deepest”
International Monetary Fund,
World Economic Outlook
, April 2009, p. 9.
http://www.imf.org/external/pubs/ft/weo/2009/01/index.htm

267
“I’ve been in the trenches:”
Interview, Henry Paulson.

268
“chance to talk”
CBS News,
60 Minutes
, March 15, 2009.
http://www.cbsnews.com/stories/2009/03/12/60minutes/ main4862191.shtml

268
“the best possible”
Jon Hilsenrath, “Bernanke’s PR Push Rewrites Fed Script,”
Wall Street Journal
, April 15, 2009, A1.

269
“increased uncertainty”
Ben Bernanke, “Long-term commitments, dynamic optimization, and the business cycle,” MIT, 1979.
http://dspace.mit.edu/handle/1721.1/29839

269
“I think it is important”
Jon Hilsenrath, “Bernanke’s PR Push Rewrites Fed Script,”
Wall Street Journal
, April 15, 2009, p. A1.

270
“The biggest risk”
CBS News,
60 Minutes
, March 15, 2009.
http://www.cbsnews.com/stories/2009/03/12/ 60minutes/main4862191.shtml

270
“We should not”
Sen. Mark Warner, “Floor Statement: Systemic Risk Regulation,” June 16, 2009.

271
“I come from Main Street”
Ibid.

272
“Regulators”
Ben S. Bernanke, “Four Questions About the Financial Crisis,” Federal Reserve Board, April 14, 2009.
http://www.federalreserve.gov/newsevents/speech/ bernanke20090414a.htm

275
“Regarding the Great Depression”
Ben S. Bernanke, “On Milton Friedman’s Ninetieth Birthday,” Federal Reserve Board, November 8, 2002.
http://www.federalreserve.gov/ boarddocs/speeches/2002/20021108/default.htm

Bank of England

The Fed’s counterpart in the United Kingdom.
central bank

An institution, such as the Fed, that controls the supply of credit in an economy.

collateral

Property pledged by a borrower to pay off a loan if the borrower can’t come up with the money. When a lender holds collateral, a loan is said to be secured; when it doesn’t, a loan is unsecured.
discount rate

Rate at which the Fed lends directly to banks, set by the Federal Reserve Board of Governors and based on recommendations from district Fed banks.
discount window

Nickname for the Fed’s direct lending to banks.
European Central Bank

The Fed’s counterpart for the sixteen countries that share the euro.
Exchange Stabilization Fund

Created in 1932 to give the Treasury money to buy gold, currencies, and other securities to influence exchange rates; used to backstop money market mutual funds in 2008.

federal funds interest rate

Rate at which banks lend to each other overnight; largely controlled by the Fed.

Federal Open Market Committee (FOMC)

Monetary policy committee composed of the seven governors plus the twelve presidents, five of whom have a vote at any one time.
Federal Reserve Board of Governors

Seven members, known as governors, each appointed by the president and confirmed by the Senate. Based in Washington.
Federal Reserve Bank of New York

Most important of the twelve regional or district Fed banks, each with its own president and private-sector board of directors.
lender of last resort

The entity, usually the central bank, that can lend to banks and others who cannot get loans elsewhere.

Maiden Lane

Special corporations created by the Fed (named for a street that goes by the New York Fed headquarters) to hold assets the Fed bought from Bear Stearns and American International Group.

money market mutual funds

Investment vehicles that take money from investors large and small and buy short-term government and corporate securities.
mortgage-backed securities

Widely held financial instrument composed of large numbers of mortgages or pieces of mortgages.
primary dealers

Sixteen banks and securities firms with which the New York Fed trades securities.

Primary Dealer Credit Facility

Created by the Fed in March 2008 to expand the discount window to provide loans to securities firms, not only banks.
repurchase agreement

Loan in which one side agrees to buy a security from the other and sell it back at a fixed date and a fixed price. Known as “repo.”

securitization

Practice of turning loans made by banks and others into securities that can be held and traded by investors.
Term Asset-Backed Securities Loan Facility (TALF)

Launched In March 2008 by the Fed and Treasury to lend to investors who buy securities backed by loans to consumers and businesses.

Term Auction Facility (TAF)

Created by the Fed in December 2008 for banks to borrow from the Fed as an alternative to the discount window; rate set in auctions.

tri-party repo

Loan — or repurchase agreement — in which a bank serves as a middleman between the borrower and lender.

Treasury Securities Lending Facility

Created by the Fed in March 2008 to lend easily sold Treasury securities to Wall Street firms in exchange for less easily sold securities.
Troubled Assets Relief Fund

Created by Congress in October 2008 to provide $700 billion to Treasury to buy assets from and invest in banks.

unusual and exigent

Circumstances, under federal law, in which the Fed can lend to nearly anyone.

yield

Interest rate that the market sets on government and private debt securities.

In addition to newspaper, magazine, and wire service accounts and academic papers, the following books provided useful perspective
.

Ahamed, Liaquat.
Lords of Finance: The Bankers Who Broker the World
, New York: Penguin Press, 2009.

Atack, Jeremy, and Peter Passell.
A New Economic View of American History
, New York: W. W. Norton & Co., 1979.

Bagehot, Walter.
Lombard Street: A Description of the Money Market
, New York: Armstrong & Co., 1873.

Bernanke, Ben S.
Essays on the Great Depression
, Princeton, N.J.: Princeton University Press, 2000.

Blinder, Alan S.
Central Banking in Theory and Practice
, Cambridge, Mass.: MIT Press, 1998.

Carr, Sean D., and Robert F. Bruner.
The Panic of 1907: Lessons Learned from the Market’s Perfect Storm
, Hoboken, N.J.: John Wiley & Son, 2007.

Dighe, Ranjit S.
The Historian’s Wizard of Oz: Reading L. Frank Baum’s Classic as a Political and Monetary Allegory
, Westport, Conn.: Praeger, 2002.

Frank, Robert, and Ben S. Bernanke,
Principles of Economics
, New York: McGraw Hill, 2001.

Friedman, Milton, and Anna Jacobson Schwartz,
A Monetary History of the United States, 1867 — 1960
, Princeton, N.J.: Princeton University Press, 1963.

Glass, Carter.
An Adventure in Constructive Finance
, Garden City, N.Y.: Double-day Page & Company, 1927.

Gordon, John Steele.
An Empire of Wealth: The Epic History of American Economic Power
, New York: HarperCollins Publishers, 2004.

Gramlich, Edward M.
Subprime Mortgages: America’s Latest Boom and Bust
, Washington, D.C.: Urban Institute Press, 2007.

Greenspan, Alan.
The Age of Turbulence: Adventure in a New World
, New York: Penguin Press, 2007.

Greider, William.
Secrets of the Temple
, New York: Simon & Schuster, 1987.

Hackley, Howard H.
Lending Functions of the Federal Reserve Banks: A History
, Washington, D.C.: Federal Reserve Board of Governors, 1973.

Hammond, Bray.
Banks and Politics in America from the Revolution to the Civil War
, Princeton, N.J.: Princeton University Press, 1957.

Kelly, Kate.
Street Fighters
, New York: Penguin Press, 2009.

Kindleberger, Charles P., and Robert Aliber,
Manias, Panics, and Crashes
, Hobo-ken, N.J.: John Wiley & Sons, 2005.

Meltzer, Allan H.
A History ofthe Federal Reserve, Volume 1:1913—1952
, Chicago: University of Chicago Press, 2003.

Meyer, Laurence H.
A Term at the Fed: An Insider’s View
, New York: HarperCollins Publishers, 2004.

Mishkin, Frederic S.
The Economics of Money, Banking, and Financial Markets
, Boston, Mass.: Addison Wesley, 2007

Tarullo, Daniel K.
Banking on Basel: The Future of International Financial Regulation
, Washington, D.C.: Peterson Institute for International Economics, August 2008.

Taylor, John B.
Getting Off Track
, Stanford, Calif.: Hoover Institution Press, 2009.

Woodward, Bob.
Maestro: Greenspan’s Fed and the American Boom
, New York: Simon & Schuster, 2000.