J. Bradford DeLong
When historians analyze the coming depression, they will judge the point of no return to have been when the US authorities allowed Lehman Brothers to collapse. The extended web of finance that existed up to that point was the result of millions of calculations that the government did, in fact, guarantee the unsecured debt of every large bank and bank-like entity in America.
BERKELEY – For 15 months, the United States Federal Reserve, assisted by the financial regulators of the US Treasury, have been trying to make the macroeconomic consequences of the American mortgage-backed securities financial crisis as small as possible – trying, above all, to avoid a deep depression.
They have also had three subsidiary objectives:
• Keep as much economic activity as possible under private-sector control, in order to ensure that what is produced is what consumers really want.
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