MICHELE NORRIS, Host:
Tamara, let's start first with the Fed, though. Normally, these Fed statements require reading between the lines to try to figure out exactly what it is they were trying to say. Not so much today. They were pretty clear.
TAMARA KEITH: Ken Kuttner, I spoke with him. He's a former Fed economist and a professor at Williams College and he described the specificity and the length of time - nearly two years - as really astounding.
KENNETH KUTTNER: Apparently, the situation was viewed as being sufficiently serious by enough people that essentially promising not only an extended period of low interest rates, but a very extended and reasonably specific period of low interest rates would be beneficial to the economy.
NORRIS: So you heard Mr. Kuttner there talking about a sufficiently serious situation. What else does the Fed actually have to say about the state of the economy?
KEITH: Well, the Fed said that just since they had met in June, the economic growth had slowed, that their sense of what was to come has gotten a little bit darker. They said that there's been deterioration in overall labor market conditions in recent months and they said that, you know, back in June, they thought some of the things that were causing the economy to slow down were temporary - you know, the earthquake and tsunami in Japan and other things - and they say that now that appears to have only accounted for some of the recent weakness in the economy.
NORRIS: One of the things that people all around seem to be concerned about in the world of finance and politics, as well, is confidence. And leading into this meeting, there was some discussion or perhaps even some hope that the Fed would do something aggressive like perhaps launch another round of programs to boost the economy and build confidence.
KEITH: And what you're talking about here is quantitative easing. Everybody started saying QE3, QE3. Well, the Fed didn't do that. That was a bond buoying program last year was QE2. They didn't that, but they left the door open. I spoke with Randall Kroszner. He's an economist at the University of Chicago and a former governor of the Federal Reserve board. And he said, yeah, the Fed's keeping their options open.
RANDALL KROSZNER: They have chosen not to do those. They're studying other options, but at this time, they decided to simply harden the commitment to low, short term interest rates and then they will consider other options.
KEITH: But the key here is that the Fed is willing to consider other options if the economy doesn't pick up.
NORRIS: Now, when we talked to you yesterday about Wall Street, the picture was looking pretty grim. Today, the Dow closed up almost 4 percent after a huge sell-off yesterday. What happened? What explains this?
KEITH: Well, I am beginning to feel a little bit like a broken record here, but it's never just one thing. You know, first off, there was this Fed statement that gave people certainty, investors a kind of certainty about interest rates that they haven't had. And then, also, investors woke up this morning and realized, you know, perhaps some of these stocks had been oversold yesterday, maybe they cut too deep. And also, bank stocks, which had led the way down yesterday, they rebounded somewhat.
NORRIS: So I just want to ask about the banks if I can. We just have a little bit of time left. They really did take a beating yesterday, as you said. And are people concerned that we're back where we were maybe in 2008, are things looking that grim?
KEITH: Well, I called a bank analyst to ask about that because, yes, some people were having flashbacks yesterday. So I checked in with Paul Miller. He's managing director at FBR and he says that banks have much stronger balance sheets these days.
PAUL MILLER: It's not that JP Morgan's going go under. It's not that Wells Fargo's going to go under. Those were the concerns two and a half years ago. It was like, was the government going to nationalize the banking system? And that is done. That's over with. That's not going to happen again.
KEITH: He says that even though Bank of America and Citibank both saw their stocks rise today, they still aren't back to where they were a few days ago. But he says, the fundamentals are there on some level, but this is not 2008.
NORRIS: Tamara Keith is a business reporter for NPR. Tamara, thanks so much for being with us here.
KEITH: You're welcome. Transcript provided by NPR, Copyright NPR.