No Nation Has Ever 'Printed' Its Way Out of Economic Disaster
March 16, 2008
Fed Chief Shifts Path, Inventing Policy in Crisis
WASHINGTON — As chairman of the Federal Reserve, Ben S. Bernanke has long argued that a central bank should base its policies as much as possible on consistent principles rather than seat-of-the-pants judgment.
But now, as the meltdown in credit markets threatens major institutions on Wall Street and a recession appears inevitable, Mr. Bernanke is inventing policy on the fly.
. . . That move (the Bear Stearns bailout) came just days after the Fed announced a $200 billion lending program for investment banks and a $100 billion credit line for banks and thrifts. In a move that would have been unthinkable until recently, the central bank agreed to accept potentially risky mortgage-backed securities as collateral.
. . . Fed officials expanded the program to $60 billion a month in January and $100 billion a month in March.