|By MARTIN CRUTSINGER, AP Economics Writer|
"We're crossing certain lines. We're doing things we haven't done before," Chairman
The crisis had been building for months. In an emergency conference call
Bernanke apologized to his colleagues for convening the call on the Martin Luther King holiday. But he said he felt that the urgency of the crisis required the Fed to act before its regularly scheduled meeting the next week. The Fed approved a cut of three-fourths of a percentage point in its benchmark for short-term rates.
On Friday, the Fed released hundreds of pages of transcripts covering its 14 meetings during 2008 — eight regularly scheduled meetings and six emergency sessions. The Fed releases full transcripts of each year's policy meetings after a five-year lag.
The 2008 transcripts cover the most tumultuous period of the financial crisis, including the collapse and takeover of investment bank
In September, the crisis erupted with full force. The government took over mortgage giants
Also in September, the Fed bailed out insurance giant
The transcripts reveal the internal arguments Bernanke deployed to marshal support for unorthodox policy actions — including from
"The downward trajectory of economic data," Yellen went on, "has been hair-raising— with employment, consumer sentiment, spending and orders for capital goods, and homebuilding all contracting." Market conditions had "taken a ghastly turn for the worse," she said. "It is becoming abundantly clear that we are in the midst of a serious global meltdown."
Yellen said she had downgraded her economic outlook and was projecting a recession, with four straight quarters of declining growth. The recession was later determined to have started in
The Fed's efforts failed to contain the damage from the financial crisis failed to prevent the recession from becoming the worst since the 1930s. But Fed officials and many economists have argued that without the its efforts, the Great Recession could have been more catastrophic, perhaps rivaling the Great Depression of the 1930s.
The Fed's efforts to deal with the fallout from a collapsing housing bubble and subprime mortgage crisis had begun in 2007. The Fed cut a key short-term rate three times that year. The cuts totaled a full percentage point and took the rate from 5.25 percent to 4.25 percent at the end of 2007.
Then, at an emergency meeting on
By the end of 2008, the Fed made eight rate cuts, leaving the funds rate on
The Fed that year also launched other never-before-tried programs to get money flowing to parts of the economy that were struggling to get credit.
Fed policymakers fretted over the unprecedented steps they were taking.
"This proposal crosses a bright line that we drew for ourselves in the 1970s in order to limit our involvement in housing finance," Lacker said.
AP Business Writers
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