Resources for Basel II Capital Accord (Basel II)

Lessons from the credit crunch

www.economist.com

AFTER a sudden market panic, all is well. Prices dropped precipitately, but investors have come to see that the Federal Reserve, under its new chairman, will not let the economy slide. Normality has been restored.

That was 20 years ago. Black Monday, October 19th 1987, was the day stockmarkets plunged; and Alan Greenspan, who won his central-banking spurs in that crisis, was the Fed chairman (see article). Two decades on, in the wake of this summer's subprime squeeze, stockmarkets are showing similar faith in Ben Bernanke, Mr Greenspan's successor. Despite bad news from the housing market and warnings from the treasury secretary, America's equity markets are still higher than they were in May. Amazingly, investors have been buying both on good news (don't worry, the economy is fine) and on bad (don't worry, the Fed will come to the rescue by cutting rates).

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