Wednesday, February 4, 2009
Fed Economist: “You had People in Government Saying: `We’re Smart Guys, Trust Us.’ But They Were Either Wrong or They Were Lying”
Several fed economists have slammed the fed's handling of the financial crisis.
Specifically, 3 economists at the Minneapolis Fed analyzed the Fed's actions, and determined that they were unsupportable.
Dave Lindorff has the story:
Charri and his colleagues and co-authors Lawrence Christiano and Patrick Kehoe agree that with companies like Lehman Brothers, AIG and Citigroup foundering because of toxic debt instruments, there was a sense of a financial crisis brewing, but they say it wasn’t a credit freeze. “This was a lot like the run-up to the Iraq invasion in 2003,” says Charri. “You had people in government saying: `We’re smart guys, trust us.’ But they were either wrong or they were lying.”
Adds Kehoe: “Normally, when you’re going to spend a lot of money, you present the data and the economic theory to support it, yet here’s the biggest non-military government intervention in history since the Great Depression, and there was no evidence presented to support it, and no detailed economic argument made about what market failures this $700 billion was going to fix.”***
Liberal economist James Galbraith, a professor at the University of Texas, calls the credit crisis “more hype than real math.”
If the problem ended with Paulson, that would have been bad enough. But now Obama's economic team is compounding the error.