As the United States economy began to sink into crisis in mid-2007, the Federal Reserve led by a cautious Ben Bernanke wanted to hold off from addressing rising panic, documents show.
Fed policy makers had begun holding a series of unscheduled meetings to address turmoil in the markets from the US housing collapse at the time.
But transcripts from those meetings released on Friday showed a reticence to move without real economic data to back up the pessimists.
Four months before the economy plunged into its worse recession since the 1930s, in an August 16, 2007 emergency video conference of the Fed's Federal Open Market Committee (FOMC), chairman Bernanke acknowledged the rise in market fears.
"Since we last met in these circumstances financial markets have come under even more stress," he told fellow policy makers, referring to their talks just six days earlier.
"As you know, some effects of this are desirable. We're seeing reductions in risk. We're seeing deleveraging, and we're seeing revaluation of assets.
"But I think we're also seeing a certain amount of panic, a certain amount of markets seizing up, with good credits not being able to be financed; and a good deal of concern that there is a potential for some downward spiral in the markets that could threaten or harm the economy."
Despite that view, Benanke said he did not back a cut to the Fed's benchmark interest rate to quell the panic. He and others thought the economy was still on firm ground.
"I wouldn't say that a rate cut is completely off the table, but my own feeling is that we should try to resist a rate cut until it is really very clear from economic data and other information that it is needed."
FOMC officials were also worried about taking actions that would appear like they were trying to rescue certain teetering banks - even though that is what they would later do.
"I'd really prefer to avoid giving any impression of a bailout," he told the meeting, referring to a possible cut in the Fed's benchmark interest rate.
In the end the Fed decided to hold the benchmark rate steady, while cutting slightly its discount rate for banks, to ease some tighter liquidity in the inter-bank market.
The move was not without some resistance: Jeffrey Lacker, head of the Richmond Fed branch, warned: "We could easily be portrayed as helping large banks make a bunch of money on this," rather than helping "little people."
"We are doing a very unconventional thing," Bernanke acknowledged.
But a month later the economic worries became clearer, and the FOMC cut the benchmark by an extraordinary 0.5 point, from 5.25 per cent to 4.75 per cent.
The FOMC would begin to slash the rate by big chunks five months later, taking it down to zero to 0.25 per cent by the end of 2008, and holding it there until today as the economy continues to struggle.
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