Federal Reserve and Economic Crisis

Ever since this crisis has blown out of proportions, everyone including the media has been looking for scapegoats or as they call it 'people/institutions responsible for this crisis'. Several institutions like Fannie,Freddie, SEC and most importantly Federal Reserve have been accused of sitting at sidelines, ignoring warning bells and even fueling this speculative bubble.Federal Reserve always had a bad reputation among Right wing economists. In the famous "The Monetary History of United States 1863-1960", Milton Friedman and Anna Schwartz argued that 'The Great Depression' was in fact caused by Fed. So to explain the cause of this crisis,commentators once again turned to role of Fed in creating financial/economic crisis.  One man whose legacy has been tarnished,probably forever, is Alan Greenspan, Chairman Federal Reserve, 1987-2005. The Maestro suddenly became a pariah. He became an immediate target of both the Right and the Left. Economists with conservative leanings charged that by keeping interest rates too low for too long,he fuelled this speculative bubble. Left wing economists feared that US may slip into Japanese style deflation and to avoid that outcome were in favour of low interest rates during 2002-05.Hence, their line of attack focusses on his disdain for more regulations. They claim that it's FED's responsibility to check excessive growth of sub-prime loans and their failure to regulate sub-prime loans caused this crisis. Since he has been under attack from all sides, it has now become conventional wisdom that Fed caused this crisis. So is Fed responsible for this crisis? If so, to what extent. Alan Greenspan strongly refutes this claim

 http://online.wsj.com/article/SB123672965066989281.html

So Wall Street Journal asked other experts their opinion as to whether FED is guilty or not.

Here is their reponse

http://online.wsj.com/article/SB123811225716453243.html