Fed transparency

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Zaid Reply:
January 27th, 2010 at 4:08 am

Hi Tom,

I had a different read on this whole transparency issue. If Bernanke is taking a lesson from the 1930s, one event that made the the whole banking system shut down was the publication of the names of banks that had received loans from the Reconstruction Finance Corporation. That happened in January 1933. In the weeks following the publication, there were many bank runs on the banks that were perceived as being weak by the public. In March, the whole banking system was shut down by Executive Order… and well, the rest is history.

I don’t mean to imply that Bernanke’s worries are warranted. They shouldn’t be if the Fed lends in unlimited quantities to meet withdrawals by the public, but then again, we already know how much he really knows about how the system really operates under a non-convertible floating exchange rate regime.