Thursday, September 18, 2008

A great overview of the crisis by guests on Freakonomics blog

Doug Diamond and Anil Kashyap penned a very thoughtful overview of the financial crisis, where probably the most interesting part is the analysis. The Fed arguably made the right move by not addressing the credit crunch with a (further) lowered federal funds rate, but by some underwriting, a.k.a. bailing out. But what precedents does that set, and what implications are there for behavior of firms like A.I.G. that are far from the Fed's typically regulated client?