In 2000, when Wall Street's bubble burst and the economy hit a brick wall, Federal Reserve Chairman Alan Greenspan and other Fed officials revealed in their closed-door meetings plenty of concern about just where things might be headed.
Transcripts of those discussions, released Tuesday, found the officials groping to determine what the sharp declines in the stock market might do to the broader economy.
Various major market indexes began 2000 by hitting record highs, with the Dow Jones industrial average peaking at 11,722.98 on Jan. 14, 2000. But then the market began a sharp dive as the Internet stock bubble burst. At the lows two years later, more than $7 trillion in paper wealth had been wiped out.
Not all the Fed's discussions were completely serious. Greenspan, during a December meeting, told his Fed colleagues, "I have gotten calls from a number of senior high-tech executives who are telling me that the market is dissolving rapidly before their eyes."
But Greenspan prompted a laugh by adding, "I suspect that a not inconceivable possibility is that what is dissolving in front of their eyes is their own personal net worth."
Even with the market beginning to falter in early 2000, the Fed stuck to its campaign to push interest rates higher to slow economic growth as a way to keep inflation under control.
The Fed, which had begun pushing rates higher in June 1999, continued that campaign with three more rate increases in 2000, including a final half-point boost that left the federal funds rate at a nine-year high of 6.5 percent.
That final rate hike at the May 16, 2000, Fed meeting has been controversial, with some economists arguing that the central bank overdid the tightening just as the economy was about to slow sharply.
While some Fed policy-makers argued at the time for a quarter-point move rather than the more aggressive half-point increase, Greenspan pushed for the bolder action, the transcripts indicate.
"I believe the risks in moving 50 basis points today are not very large because I think the underlying momentum of the economy remains very strong," he said.
However, while the economy was growing rapidly in the spring quarter, it slowed abruptly in the summer of 2000.
The central bank made no further changes in rates after May and by December policymakers were debating whether the economy had slowed so sharply that rate cuts were warranted.
But at a December gathering of the Federal Open Market Committee, the group that meets eight times a year to set interest rates, officials were split on whether they should cut rates immediately or wait for further data.
William Poole, the president of the St. Louis Federal Reserve Bank, likened the Fed's efforts in managing the economy to a recent experience in a Boeing Co. flight simulator simulating the landing of an F-18 on the deck of an aircraft carrier.
"That means finding oneself wobbling first one way and then the other way. And I think we have some of the same concerns about monetary policy. We don't want to overreact," he said.
Greenspan prompted laughter by asking, "Did you land or didn't you land?"
He persuaded the FOMC members to delay a rate cut at the December meeting but alerted them to be near their telephones, saying he might schedule an emergency inter-meeting conference call in early January if the economy continued to weaken.
The Fed ended up cutting rates by a half point on Jan. 3, 2001, after a telephone conference call, returning the funds rate to 6 percent, where it had been before the half-point increase the previous May.
The Jan. 3 rate cut was the first of an extended series of rate cuts as the central bank worked to counteract a series of economic blows including the collapse of stock prices, the beginning of a recession in March 2001 and the impact of the September 2001 terrorist attacks.
The transcripts released Tuesday covered the FOMC's eight regular meetings in 2000. The Fed, under an agreement with Congress, releases transcripts of its meetings with a five-year lag.