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November 13, 2008

Fed vs Fed: The Fed is Now Fighting Itself

This sideshow is almost embarrassing, but you had to see it coming when the Minneapolis Fed puts out its paper of “myths” with respect to the current credit crisis:

A team at the Federal Reserve Bank of Minneapolis argues that four common claims about the sharp drop in bank lending to nonfinancial borrowers during the crisis are false, and they provide extensive data to back up this argument.

The study does not deny that the United States is suffering a financial crisis. Instead, it uses the evidence to dispute how this is spilling over the rest of the economy.

But researchers from the Boston Fed say the Minneapolis Fed's work ignores underlying loan market dynamics indicating a credit crunch, although they agree the numbers can be hard to untangle.

"Such a difference of opinion and open debate between researchers at Federal Reserve banks is both unusual and interesting, and is testimony to the difficult times in which we find ourselves," said former Atlanta Fed research head Bob Eisenbeis.

More here.

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