A recent story by Bloomberg on the money that went to Wall Street to provide liquidity highlights the fact that the microeconomics of credit have very strong macroeconomic implications. Maybe this has always been the case. I remember the discussion on the failure of banks in the US in the Monetary History by Milton Friedman. The optics of failure and bank runs make a difference; however most of monetary economics is focused on the macro impact of credit flows. In a crisis, it is the micro that drives the markets and the liquidity needed by Morgan Stanley is perfect example of the micro issues.
Morgan Stanley borrowed $107 billion during the 2008 crisis. his was more than Citibank which is twice as large. Of course, you had to have reporters do a Freedom of Information Act to get at this information. The company never told anyone about this borrowing and the Fed was also quiet. It may have saved Wall Street. All we know is that monetary policies that are often micro in nature may have a greater than any setting of interest rates.
Morgan Stanley borrowed $107 billion during the 2008 crisis. his was more than Citibank which is twice as large. Of course, you had to have reporters do a Freedom of Information Act to get at this information. The company never told anyone about this borrowing and the Fed was also quiet. It may have saved Wall Street. All we know is that monetary policies that are often micro in nature may have a greater than any setting of interest rates.
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