Summary of What Were They Thinking?

The Federal Reserve in the Run-up to the 2008 Financial Crisis


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What Were They Thinking? summary
Given its unparalleled access to experts, data and markets, shouldn’t the Federal Reserve have anticipated the 2008 financial crisis?


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With 500 top professional economists, 2,500 supervisory personnel, and an extensive network of formal and informal relationships throughout the financial sector, the Federal Reserve was in a unique position to foresee and perhaps prevent the financial crisis of 2008. So why didn’t it? Professors Stephen Golub, Ayse Kaya and Michael Reay scoured the printed records of what Fed insiders were saying behind closed doors in the years leading up to the crisis. The authors exercise their respective specializations in economics, political science and political sociology to understand why “the most powerful and prestigious economic agency in the world” didn’t see the catastrophe coming. getAbstract recommends this accessible, unsettling, eye-opening article to policy makers and Fed watchers.

In this summary, you will learn

  • How the Federal Reserve dealt with the signs of a financial bubble before 2008
  • How traditional theories about its lack of action fall short
  • Why the Fed was apparently unable to foresee the severity and depth of the crisis that unfolded


The Federal Open Market Committee (FOMC) is the Federal Reserve’s main policy-making organ. Its members are the seven governors of the Federal Reserve Board, along with the 12 presidents of the regional Fed banks. FOMC transcripts show that, from 2004 to 2006, Fed officials seldom discussed either subprime...
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About the Authors

Stephen Golub is an economics professor at Swarthmore College, where Ayse Kaya is an assistant professor in political science and Michael Reay is an assistant professor in political sociology.

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