Word: fed
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Dates: during 2000-2009
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With Bear shareholders virtually wiped out, half the firm's employees slated to lose their jobs and no golden parachutes offered to the top executives, it wasn't a bailout. But it did take a $30 billion loan from the Fed to seal the deal. This was a truly extraordinary use of the central bank's powers and an indication that the subprime-mortgage crisis that erupted last summer has evolved into something bigger and more ominous--possibly the greatest challenge to the American way of financial capitalism since the Depression...
...immediate market reaction to the deal--and to the three-quarter-point interest-rate cut announced by the Fed two days later--was positive. Stocks rose nearly 4%; credit markets calmed a bit; the global financial system lived to fret another day. And fret it surely will, for the troubles that mauled Bear are far from over...
Economist Milton Friedman argued--and eventually convinced most of his colleagues--that it was the Fed's failure to keep enough dollars in circulation that made the Great Depression such a great disaster. No Federal Reserve chairman will ever let that happen again, so we probably shouldn't worry too much about bread lines and Hoovervilles in the near future. But the money supply is a blunt instrument, one that comes nowhere near addressing all of today's problems. "The issue is not one of liquidity but one of solvency," says Richard McGuire, a strategist at RBC Capital Markets...
...Fed Fix Things...
...greatest power of the fed is that it can create dollars at will. It gets those dollars into the economy by buying Treasury securities on the open market. When you hear the Fed is cutting rates, that usually means it's ordering the traders at the Federal Reserve Bank of New York to start buying, and that drives short-term Treasury rates down...