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 DISSENTING STATEMENT

banks were unable to get overnight loans, compounding an increasingly re-
stricted ability to raise short-term funds elsewhere.
• Repo. By September , repo rates increased substantially, and haircuts bal-
looned. Nontraditional mortgages were no longer acceptable collateral.
• Commercial paper. The failure of Lehman and the Reserve Primary Fund
breaking the buck sparked a run on prime money market mutual funds. Money
market mutual funds withdrew from investing in the commercial paper mar-
ket, leading to a rapid increase in funding costs for financial and nonfinancial
firms that relied on commercial paper.
The inability to find funding, financial firm deleveraging, and macroeconomic
weakness translated into tighter credit for consumers and businesses. Securitization
markets for other kinds of debt collapsed rapidly in  and still have not recovered
fully, cutting off a substantial source of financing for credit cards, car loans, student
loans, and small business loans.
Decreased credit availability, the collapse of the housing bubble, and additional
wealth losses from a declining stock market led to a sharp contraction in consump-
tion and output and an increase in unemployment.
Real GDP contracted at an annual rate of . percent in the third quarter of ,
. percent in the fourth quarter, and . percent in the first quarter of . The eco-
nomic contraction in the fourth quarter of  was the worst in nearly three
decades. Firms and households that had not previously been directly affected by the
financial crisis suddenly pulled back–businesses stopped hiring and halted new in-
vestments, while families put spending plans on hold. After the panic began, the rate
at which the economy shed jobs jumped, going from an average of , jobs lost
per month in the first three quarters of , to an average of over , jobs lost
per month in the fourth quarter of  and the first quarter of . The economy
continued to lose jobs through most of , with the unemployment rate peaking at
. percent in October  and remaining above . percent for the rest of 
and the first eleven months of .
While the shock and panic therefore appear to have ended in early , the harm
to the real economy continues through today. Firms and families are still deleverag-
ing and are uncertain about both future economic growth and the direction of future
policy. The final tragedy of the financial and economic crisis is that the needed recov-
ery is slow and looks to be so for a while longer.

NOTES
1. A vote of the Commission on December 6, 2010, limited dissenters to nine pages each in the
approximately 550-page commercially published book. No limits apply to the official version sub-
mitted to the President and the Congress.
2. Ben S. Bernanke, “Monetary Policy and the Housing Bubble,” Speech at the Annual Meeting of
the American Economic Association, Atlanta, Georgia, January 3, 2010 (www.federalreserve.gov/
newsevents/speech/bernanke20100103a.htm).
3. Ibid.