Tuesday, September 01, 2009

Diane Swonk has a nice, short, colloquial history of the Fed's management of the crisis.

It begins:

* August 1, 2007: BNP Paribas, one of Europe's largest banks released better-than-expected earnings...
* August 9, 2007: Bloomberg reported that BNP Paribas halted withdrawals from three funds because they could no longer "fairly" value their holdings...

This news, coupled with the fact that the CEO of the bank seemed oblivious to the situation just eight days prior, sent European markets into a tail spin. Trust between banks was shattered, and the overnight loans that banks provide to one another all but disappeared.

In response, the European Central Bank (ECB) was forced to intervene to stabilize markets and provide liquidity.

The piece is entertaining and short, and does a nice job of capturing some of the personalities involved.

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