Matt Yglesias’s succinct take on the recent Bloomberg investigation into the Federal Reserves actions taken during the height of the financial crisis. My choice quote, picked because some don’t seem to understand the unique role that a central bank plays in certain circumstances:
Serving as a “lender of last resort” is historically one of the main roles of a central bank. When everyone decides they want more liquidity simultaneously, everyone will end up going bust. But a central bank can’t “run out of money” so it never needs to worry about liquidity. What it’s supposed to do in a panic is ensure that liquidity problems don’t cripple banks and create new liquidity problems.