Re: Fed's Aid in 2008 Crisis Stretched Worldwide
Your article about the Fed's actions in 2008 to lend $580 billion in so-called "swap lines" to central banks internationally sounds a note of triumphalism that is completely unwarranted. The Fed had no authority to lend to these entities, despite its attempts to justify its action as lending against collateral. In any regard, if the collateral against which the Fed lent dollars was so strong and, as your article states, the American taxpayers actually made money on the deal, why did the Fed need to get involved at all? The obvious answer is that the Fed took an illegal risk that fortunately worked out. New York Fed President Timothy Geithner's chest puffing statement that "the privilege of being the reserve currency comes with some burdens" is especially troubling in that we may assume that in the future the Fed will engage in similar risky adventures. One final note...what caused the 2008 crisis in the first place? Your article identifies it perfectly: "The root cause of the problem was this: Global banks did lots of business in dollars--buying up United States mortgaged-backed securities,..." And what initiated the massive issuance of these soon-to-be-worthless mortgaged-backed securities? Fed money printing. So, please, let's not call the Fed a hero, when it really caused the crisis that led to its illegal actions.