The Conversation (Part 1)

What did we learn from the Fed’s transcript?

On Friday the Federal reserve released its transcripts of Open Market Committee meetings that took place in 2008. These are word-for-word records of the debates, announcements, research findings, jokes, and worries that each of the Fed Presidents and Governors had during the greatest Financial Crisis in over seventy years.

The eight meetings and five conference calls generated almost 1500 pages of recorded conversations among policymakers that will be examined for years to determine whether the Fed acted effectively and expeditiously in addressing the crisis. Some of that will be Monday-morning quarterbacking, but some will be legitimate analysis to see what works and what doesn’t work in monetary and regulatory policy.

Already some journalists have looked at the use of humor during the Fed’s meetings and note that as the crisis deepened, the moments of laughter during the meetings became more infrequent—and the jokes got darker. Just after the Fed agreed to extend JP Morgan the credit it needed to purchase Bear Stearns and assume its debt, Chairman Bernanke mocked the alphabet-soup of Fed programs by repeating the vowels: “AEIOU.” New York Fed President Geithner lightened the mood by responding, “Don’t say IOU.”

One thing is clear from these transcripts: the new Chair, Janet Yellen, was always extremely well-prepared and articulate. She was frequently quoted by the other Governors, and by all accounts she had a fiercely loyal professional staff. Ben Bernanke was a student of Great Depression who helped avoid a repeat of that crisis in the early 21st century. Janet Yellen will be an excellent successor. We should be encouraged that the Central Bank’s leadership appears so competent.

Douglas R. Tengdin, CFA

Chief Investment Officer

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