They were thinking things looked A-OK. For a while….
"I think that our policy is looking actually pretty good," Fed Chairman Ben Bernanke said of the level of interest rates at a closed-door Fed policy meeting on Sept. 16, 2008, according to transcripts of its policy meetings released Friday with the traditional five-year lag. "Our quick move early this year, which was obviously very controversial and uncertain, was appropriate…."
The transcripts show how formerMr. Bernanke transformed from mild-mannered former professor to audacious crisis manager, and provide deeper glimpses into the views of Janet Yellen, the Fed's current chairwoman who then was president of its San Francisco regional bank.
At the September meeting, Ms. Yellen went along with Mr. Bernanke's decision to keep rates steady, but she warned: "I am very concerned about downside risks to the real economy and think that inflation risk is diminished…."
Two days later, as markets went into a tailspin and the Fed moved to bail out AIG, Mr. Bernanke and Treasury Secretary Henry Paulson went to Congress and urged lawmakers to support a bailout for the U.S. banking system.