The combination of dependence on wholesale, short-term financing; excessive leverage; generally poor risk management; and the gaps and weaknesses in regulatory oversight created an environment in which a powerful, self-reinforcing panic could begin.4 Indeed, panic-like phenomena arose in multiple contexts and in multiple ways during the crisis.
In recent years, the Federal Reserve has been quite successful in maintaining a nominal anchor. Not only has the inflation rate remained within a reasonably narrow range, but inflation expectations, as measured by spreads between inflation-indexed and non-inflation-indexed Treasury securities and by surveys of professional forecasters and the general public, have also been well anchored.