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To: Woebama
False. They raised rates about 20 times to over 5%, breaking the bubble. They held the growth of M1 to *zero* for 3 straight years, from the spring of 2005 to the spring of 2008. That is the only monetary measure the Fed directly controls by the size of its own balance sheet. Banks can freely extend broader money measures on their own, without any by-your-leave from the Fed.

And they did, while it was tightening and telling them not to and preventing any growth of narrow money. Their boneheaded action in fighting the Fed instead of following it, made the last 2 years of the bubbles and made the smash worse. But was quite entirely their own doing. They could have tightened up themselves in 2005 or 6.

The Fed perhaps left short rates too low for about one year, and it forecast its rate increases to an exceptional degree, to avoid catching the private sector off guard. That gave everyone plenty of time to adjust to coming higher rates. They used it to gamble recklessly instead.

The Fed is not omnipotent. It is not the only actor in the system. Fed haters always pretend that it can't do anything right and that everything that occurs is its doing. It is slander and nonsense, start to finish.

9 posted on 02/01/2009 5:22:37 AM PST by JasonC
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To: JasonC

Greenspan admitted some of the mistakes:

http://www.theaustralian.news.com.au/business/story/0,28124,24548000-643,00.html

I see blinkers on you — you claim the Fed is not the root cause of financial instability — even though they control the entire money supply.


10 posted on 02/01/2009 5:27:39 AM PST by Woebama
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To: JasonC
Our government as a whole gets my vote for the whole mess.

Bush aims to boost minority home ownership

From http://en.wikipedia.org/wiki/Community_Reinvestment_Act

In 1999 the Congress enacted and President Clinton signed into law the Gramm-Leach-Bliley Act, also known as the "Financial Services Modernization Act," which repealed the part of the Glass-Steagall Act, which prohibited a bank from offering a full range of investment, commercial banking, and insurance services.

The bill was killed in 1998 because Senator Phil Gramm wanted the bill to expand the number of banks which no longer would be covered by the CRA. He also demanded full disclosure of any financial deals which community groups had with banks, accusing such groups of "extortion." In 1999 Senators Christopher Dodd and Charles E. Schumer broke another deadlock by forcing a compromise between Gramm and the Clinton administration which wanted to prevent banks from expanding into insurance or securities unless they were compliant with the CRA.

In the final compromise, the CRA would cover bank expansions into new lines of business, community groups would have to disclose certain kinds of financial deals with banks, and smaller banks would be reviewed less frequently for CRA compliance. On signing the Gramm-Leach-Bliley Act, President Clinton said that it, "establishes the principles that, as we expand the powers of banks, we will expand the reach of the [Community Reinvestment] Act".

Home price index

14 posted on 02/01/2009 6:01:16 AM PST by listenhillary (Rahm Emmanuel slip - A crisis is a terrible thing to waste.)
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