New column: The crisis cycle

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My new column is in the issue of TIME with Afghanistan on the cover and online here. It begins:

It’s getting to be a familiar ritual. Markets panic. A bunch of G-men in dark suits interrupt their routines for an emergency meeting or a conference call to piece together a rescue plan. They announce the plan. Panic subsides. Then, a week to a couple of months later, it starts all over again.

I count six such episodes since August 2007. In the early days, the Federal Reserve Board did all the work and usually made its big announcement on a Friday. Since then, Treasury Secretary Hank Paulson has moved to the fore, and he picked a Sunday afternoon to float his proposal for bolstering beleaguered mortgage giants Fannie Mae and Freddie Mac. The basic pattern, though, remains the same: Financial tizzy. Dramatic government action. Period of reduced tizzy. Repeat.

Is this cycle ever going to end? It has to someday, although at this point only a fool or a psychic would dare predict when. The more important question may be, What the heck does it all mean for people without Bloomberg terminals and subscriptions to the Financial Times? Read more.

What are my six episodes? After the break, the list I came up by looking through the Fed’s press releases over the past year:

Friday, Aug. 17, 2007: Federal Reserve Board discount rate action. In a surprise move, the Fed lowers the discount rate by 50 basis points.

Monday, Sept. 17, 2007: Board announces website redesign. No, I’m not really counting that as one of my six. Couldn’t resist including it here though.

Wednesday, Dec. 12, 2007: Federal Reserve and other central banks announce measures designed to address elevated pressures in short-term funding markets. The creation of the Term Auction Facility.

Tuesday, Jan. 22, 2007: FOMC statement and Board approval of discount rate requests of the Federal Reserve Banks of Chicago and Minneapolis. In an emergency meeting, the Fed cuts the Fed funds target and the discount rate by 75 basis points.

Friday, March 7, 2007: Federal Reserve announces two initiatives to address heightened liquidity pressures in term funding markets. The Term Auction Facility is expanded, and the Fed announces a new program of 28-day term repurchase agreements. A few days later this second program gets a name, the Term Securities Lending Facility.

Sunday, March 16, 2008: Federal Reserve announces two initiatives designed to bolster market liquidity and promote orderly market functioning. The “two initiatives” had to do with extending credit to securities firms, but the big news was at the bottom of the release: “The Board also approved the financing arrangement announced by JPMorgan Chase & Co. and The Bear Stearns Companies Inc.” Treasury had a press release that day too, in which Hank Paulson said, “I appreciate the additional actions taken this evening by the Federal Reserve to enhance the stability, liquidity and orderliness of our markets.”

Sunday, July 13, 2008: Board grants Federal Reserve Bank of New York the authority to lend to Fannie Mae and Freddie Mac should such lending prove necessary. But this time the biggest new was to be found in Treasury’s press release.

As I look through these, I notice that the “usually made its big announcement on a Friday” line about the Fed is an overstatement (it’s two Fridays, a Wednesday and a Tuesday). The reason I got it wrong was that I had mistakenly counted Friday Dec. 14, the day the Fed announced the details of the first term auction, as the big day. Shall I offer my resignation now?