Fed Misread Crises in 2008, Records Show

In 2008 the Federal Reserve voted unanimously against cutting interest rates and inherently bailing out Lehman. On Friday the Federal Reserve released the transcripts of the 2008 meetings, which set monetary policy. The transcript provided a clear step-by-step image of the Fed’s important decisions. By the end of the year the Fed had reduced short-term interest rates to almost zero the lowest they have been since the great depression. During this recession the writer explains, “The Fed relied on economic models that assumed the existence of smoothly functioning financial markets limiting its ability to project the consequences of a breakdown.” The officials were heavily focused on the risk of inflation rather then the issue of rising unemployment. Mr. Bernanke insisted that the downfall of Lehman could not have been prevented without changes in federal law.

http://www.nytimes.com/2014/02/22/business/federal-reserve-2008-transcripts.html?ref=economy&_r=0