Big Think

Question: How do you rate the Fed’s response to the crisis?

Paul Krugman: Oh, the response has clearly not been adequate. I mean it’s… Now, I’m not sure that that’s because they didn’t try. I mean, you know, I think… I think about Ben Bernanke and the question is do you grade him by results or do you grade him on a curve relative to anyone else who might have been in that job? And if you grade him on a curve, he gets an A, because he’s been more proactive, more aggressive than any other Central Banker in the world would have been, but in terms of results, not so good. So, the Fed has been pretty aggressive, actually extremely aggressive, a little bit behind the curve, but they’ve moved into all kinds of things that the Fed doesn’t normally do. They’re buying commercial paper, they’re providing credit lines to investment banks, credit lines to dealers, all these things to keep the thing afloat, but it hasn’t been enough. It’s been enough to keep us from having an all-out screaming collapse. It’s, you know, you could say that the good news is that we have not seen cascading failures throughout the financial system that we, some kinds of credit are still flowing, but it hasn’t been enough to prevent interest rates for most private borrowers to go up, even as the Fed was cutting the rates it controls. It hasn’t been enough, obviously, to stop the economy from going into a nosedive.