Columbia Business School Roundtable on The Fed’s Response to the Global Financial Crisis—and Now the Pandemic

A former Federal Reserve Governor (from 2006-2008) and a former Treasury official discuss the Fed’s and U.S. government’s response both to the global financial crisis a decade ago and to the recent outbreak of the COVID-19 pandemic. Both speakers view the Fed’s swift and decisive response to the pandemic in March 2020 as a reflection of lessons learned from the financial crisis, which provided a “dress rehearsal.” After the pandemic was officially declared on March 11, 2020, the Fed accomplished in one week what had taken a year during the 2006-2008 crisis. At the Federal Open Market Committee meeting on March 15, the federal funds rate was cut to zero and a huge set of credit programs announced. Congress also passed the $2 trillion CARES bill very quickly. Had the Fed and Congress not taken such measures, the U.S. may well have experienced an escalation of bankruptcies and a collapse of the financial system. At the same time, the panelists noted that Fed lending to banks has been much lower because bank balance sheets and the rest of the financial system were much stronger in March than they were at the beginning of the financial crisis.