The Roots of America’s Financial Crisis
Today’s financial crisis has its immediate roots in 2001, when the US Federal Reserve turned on the monetary spigots to try to combat an economic slowdown amid the end of the Internet boom and the shock of the September 11 terrorist attacks. That fueled another boom, this time in housing, helped by the Fed's failure to regulate banks dangerous lending practices.
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CAMBRIDGE – The US Federal Reserve’s desperate attempts to keep America’s economy from sinking are remarkable for at least two reasons. First, until just a few months ago, the conventional wisdom was that the US would avoid recession. Now recession looks certain. Second, the Fed’s actions do not seem to be effective. Although interest rates have been slashed and the Fed has lavished liquidity on cash-strapped banks, the crisis is deepening.