Monetary Policy and the Great Recession.

Listen to the EconTalk podcast “George Selgin on Monetary Policy and the Great Recession.” Podcast link: www.econtalk.org/archives/2015/12/george_selgin_o.html The podcast guest George Selgin does not have a positive view of the Fed’s bailout of financial institutions during the 2008 financial crisis. What negative effect of bailouts is George Selgin concerned about? What may prior event have caused normally cautious money market funds to lend money to a risky Lehman Brothers before its collapse? What reason does Selgin give for not faulting Bernanke and needing rules limiting bailouts? In October 2008, the Federal Reserve started paying interest on reserve accounts for the first time. The new policy created a lower bound for the Fed Funds Rate. Guest George Selgin shocks the host Russ Roberts with the Fed’s explanation of the new policy. What did Selgin say was the Fed’s explanation of the new policy to pay interest on reserve accounts? Why is this explanation surprising to the host Roberts?

 

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