Credit Crunch a Farce - Federal Reserve Agrees

Economist Mark Perry, at his blog Carpe Diem, comments on a working paper written by the Minneapolis Federal Reserve. I concured with Mr. Perry's evidence when he initially started expressing his doubts. It blasts a hole in what I referred to as the "false narrative told by those with vested interests and insular Wall Street viewpoints".

Here is an excerpt that he pulls from the paper:

The financial press and policymakers have made four claims about the nature of the crisis.

1. Bank lending to non-financial corporations and individuals has declined sharply.
2. Interbank lending is essentially nonexistent.
3. Commercial paper issuance by non-financial corporations has declined sharply and
rates have risen to unprecedented levels.
4. 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.

I find #1 to be the most egregious, as it was the primary claim repeated incessantly by the press that convinced many Americans and their Congressmen to vote for the bailout.