Behind the scenes at the Fed in a year of crisis

Published on NewsOK Modified: February 21, 2014 at 4:07 pm •  Published: February 21, 2014
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In 2008, as they faced imploding financial markets and a staggering economy, Federal Reserve policymakers occasionally lightened their mood with references to Monty Python, "Desperate Housewives," ''Star Wars" villains and plastic surgeons in San Francisco's East Bay.

They also sketched sometimes varying pictures of the financial crisis, with Janet Yellen, now the Fed chair, among those who most accurately grasped the depth of the crisis at hand.

The Fed on Friday released transcripts from its 14 policy meetings during 2008, six of them emergency conference calls. It was a frantic year in which officials rescued investment bank Bear Stearns, bailed out insurer American International Group and mortgage giants Fannie Mae and Freddie Mac and allowed the venerable investment bank Lehman Brothers to fail in the biggest bankruptcy in American history.

The documents offer some revealing behind-the-scenes looks at the Fed in action:

— JOKING AROUND

Fredric Mishkin, a Fed governor, noted in an April meeting that consumers weren't always honest about themselves. "If you ask people what TV shows they are watching, they will tell you that they are watching PBS and something classy, but you know they are watching 'Desperate Housewives,'" he said. "What is wrong with 'Desperate Housewives?'" countered Chairman Ben Bernanke.

For his part, Mishkin dropped a Monty Python reference at the board's Jan. 29-30 meeting: "I think we're all trying to be cheery here," he said. "It reminds me a little of one of my favorite scenes in a movie, which is Monty Python's 'Life with Brian.' I remember the scene with them there all on the cross, and they start singing, 'Look on the Bright Side of Life.'"

Not to be outdone, Richard Fisher, head of the Dallas Federal Reserve Bank, invoked a movie metaphor to describe the difficulty of calming investors gripped by panic: "Crafting policy to satisfy it is like feeding Jabba the Hutt — doing so is fruitless, if not dangerous, because it simply will insist upon more."

Assessing economic conditions in California, Janet Yellen, then head of the San Francisco Fed and now Fed chair, drew laughter with this quip: "My contacts report that cutbacks in spending are widespread, especially for discretionary items. For example, East Bay plastic surgeons and dentists note that patients are deferring elective procedures. Reservations are no longer necessary at many high-end restaurants. And the Silicon Valley Country Club, with a $250,000 entrance fee and seven-to-eight-year waiting list, has seen the number of would-be new members shrink to a mere 13."

Mishkin poked fun at his own poor timing in buying a house in the midst of a real estate collapse: "I have to please my wife," he said. "I ... was thinking about pulling out but then decided that my marriage was more important."

Bernanke provided insight into his private thinking about the economy. At an April meeting, he revealed: "I play Jekyll and Hyde quite a bit and argue with myself in the shower and other places."