Federal Reserve

Five years after their last disaster, the Fed releases transcripts showing Fed officers were clueless.

"On the morning after Lehman Brothers filed for bankruptcy in September 2008, most Federal Reserve officials still believed that the American economy was growing, and that it would continue to grow, avoiding a recession.

The officials, gathered at the Fed’s marble headquarters for a meeting that had been scheduled months earlier, voted unanimously not to lower interest rates. They were not convinced the spreading financial crisis would drag down the economy, according to a transcript of the meeting the Federal Reserve released Friday.

But in a pattern that repeated itself throughout the financial crisis, Fed officials soon concluded they would need to do much more. Just minutes after the first meeting, a smaller group of Fed officials was pulled into a meeting where they agreed to prevent the collapse of a previously overlooked company at the very center of the financial system, the insurance giant American International Group."

That's great for AIG's owners, but bad for the rest of us.