November 1, 2007

A Glance at the November Issue of Portfolio: Why Academic Beliefs Fail at the Fed

By Jason M. Breslow

When the Federal Reserve Board, led by Ben S. Bernanke, slashed a key interest rate in September in response to the subprime-mortgage crisis, it proved that academic expertise alone is not enough to overcome trouble in the markets, according to John Cassidy, a contributing editor at the business magazine.

Before the cut, all signs seemed to indicate that Mr. Bernanke and his colleagues would leave interest rates alone, writes Mr. Cassidy. The reason for the policy shift will be