History Shows Fed Intervention Likely Needed Again to Contain Next Financial Crisis

The Fed has bailed out the financial system during past crises like the collapse of LTCM in 1998 and the Financial Crisis of 1966 when rate hikes caused credit issues.

Hyman Minsky's financial instability hypothesis says that stability leads to increased risk taking until a crisis happens, requiring Fed intervention.

Current high debt levels and interconnectedness among financial institutions make the system fragile, prone to crisis when rates rise.

It's not a question of if a new crisis will happen but when, as rate hikes strain an overleveraged system.

The Fed will likely have to intervene again, but the severity depends on if they act quickly enough to contain problems.