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Ten Years Later: Reflections on the 2008–09 Financial Crisis. Did we do right thing? No. Then yes. Then no. shar.es/amKdTI
If you looked at what was happening to the economy in 2007, at the run up to Bear Stearns failing and what happened to after Bear Stearns failed, there was obviously a gathering storm.
Nobody did much except react. Banks were allowed to continue paying dividends. Nobody was forced to recapitalize. The situation drifted along.
There should have been shock and awe of capital, a recognition that maintaining demand was the most important objective of macro-economic policy. Yet nobody did much. It was an obvious mistake, even at the time.
But in the crucial period of six months between the time Lehman Brothers fell and the period after the stress test, America rose to the occasion.
Banks were substantially recapitalized; significant fiscal stimulus was delivered; substantial interventions to provide liquidity to the financial markets were engineered; and the sharpest "V" in the history of the major economies was recorded between 1st and 2nd quarters of 2009
On the precipice of a truly historic economic calamity, we acted decisively, appropriately, and effectively. And this was by far the most important period to get it right.
