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Fed Failed to See Lehman’s Fallout for Economy, Transcripts Show

The day after Lehman Brothers Holdings Inc. declared the largest bankruptcy in U.S. history in 2008, Federal Reserve officials remained unsure whether the financial crisis would do lasting damage to the U.S. economy.

“I don’t think we’ve seen a significant change in the basic outlook,” Dave Stockton, the Fed’s top forecaster, said on Sept. 16, 2008 according to transcripts released today in Washington. “We’re still expecting a very gradual pickup in GDP growth over the next year.”