Mr. DeLong wrote:
"The New York Federal Reserve loaned the LCTM creditors the use of a conference room, told them they had a problem, and suggested strongly that they solve it. This is the lightest of possible government interventions..."
This is like saying that an "invitation" from the I.R.S. or the cops to come down to the office for a little chat is a light government intervention. The Fed is not in the habit of "lending conference rooms" to banks. Most banks I've been in have many conference rooms. So do their lawyers' offices. When the Fed calls up a bank, it is the definition of bad news in the banking industry. When the Fed calls a bank it is because they consider the bank's activities a possible threat to financial solvency. This was an extraordinary intervention, albeit subtle in tone. Then again, this is banking, not lion taming.
peace