Interesting new Minneapolis Federal Reserve paper out attempting to puncture some supposed myths about the current financial crisis. I take its points, but I also think it’s being a little mischievous. Definitely worth reading though.
The financial press and policymakers have made four claims about the nature of the crisis.
- Bank lending to non-financial corporations and individuals has declined sharply.
- Interbank lending is essentially nonexistent.
- Commercial paper issuance by non-financial corporations has declined sharply and rates have risen to unprecedented levels.
- Banks play a large role in channeling funds from savers to borrowers.
Here we examine these claims using data from the Federal Reserve Board. At least based on data up until October 8, 2008, we argue that all four claims are false.