The Fed and Crises

Reader Susan Webber reminds me to go read the Naked Capitalist. This post is fascinating.

[T]he Fed has basically admitted that its powers [to stem a crisis – inserted by cactus] are limited due to the extent of financial activity that takes place outside its purview (the Fed supervises federally-chartered banks; securities firms, which are regulated by the SEC and hedge funds, which are not regulated as far as their investments or solvency is concerned, are increasingly the key players in the credit markets).

Regular readers may recall I’ve had a few posts on the Fed’s behavior around election time. (I’m working on one right now looking specifically at the Greenspan Fed’s behavior around elecition time that seems to me to be a lot more damning and clearcut than anything I’ve had up so far. Interestingly enough, the Fed’s ability to influence elections, like its ability to stem disasters (Don Marek reminded me of the so called
“Plunge Protection Team” in comments to another post), may be somewhat limited. As a preview of the post I’m working on, I note that the big fluctuations in real M1 per capita in the Greenspan era occurred in 1992, 1996, and 2000 – years in which the Republicans lost (at the least the popular vote) in a Presidential election.