There is no clean controlled experiment on whether crisis banks were truly solvent because the Fed gave away profits to banks by paying interest on reserves, keeping short-term rates low, and buying assets to raise their market values, making their recovery uninformative about underlying solvency.

causalpending

Speaker

Arnold Kling

Evidence Quote

the Fed gave away profits to banks in big ways by paying interest on reserves and keeping short-term interest rates low and buying up these assets to raise their market values

Source

Arnold Kling on the Unseen World of Banking, Mortgages, and Government 07/5/2010EconTalk
Created: 6/13/2026, 7:04:06 PM

My Notes

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