Showing posts from October, 2015

How Bernanke's Encouragment of Bue Sky Thinking Shaped the Fed's Responses in the Financial Crisis

At Bernanke's behest, in response to early tremors foreshadowing the financial crisis, Federal Reserve board members and staff engaged in a process of idea generation and brainstorming. The effort was aimed at finding creative ways to provide emergency short-term lending and guarantee programs to extinguish the potential fires of financial panic and restore collapsed financial markets. 

This blue sky thinking was well underway by September 2007 and prepared the Fed for what Bernanke calls "the dark abyss" at the height of the panic and pushed the limits of the Fed's authority in the bailouts of Bear Stearns and AIG. 

By Robert Stowe England
October 30, 2015

Before former Federal Reserve Chairman Ben Bernanke came up with an array of lending facilities to put out the fires of financial panic that broke out in 2007, he laid the groundwork inside the Fed with a brainstorming effort he called blue sky thinking. “We had ongoing conversations that were like a doctors diagno…