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If the Fed fails to play this coordinating role, the market may not be able to clear on its own.
What if the Fed fails to spot when localized speculation has tipped into something much more dangerous?
The longer the Fed fails to hit 2% on average the more likely the public is to expect below-target inflation on an ongoing basis.
If the Fed fails to act, markets can only conclude that either the Fed doesn't understand economic conditions, which is not likely, or that its credibility has been reduced.
Alan Greenspan, a former Fed chairman, says inflation will exceed 10% if the Fed fails to shrink its balance-sheet and raise rates, and 3% for a time even if it does.Needless to say, that is not the Fed's view: it still foresees rising unemployment and falling inflation.
If the Fed fails to raise, some investors will interpret that as a sign that the Fed does not have confidence in the US economy going forward -- and that perception in itself could affect markets.
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Besides, what if the Feds fail to win in court?
The story so far: the real shock after the feds failed to bail out Lehman Brothers wasn't the plunge in the Dow, it was the reaction of the credit markets.
It's now clear the feds failed to verify applicants' income before relaying the list, resulting in 5,000 fraudulent Medicaid enrollments.
Officials with the California Department of Forestry and Fire Protection said the feds failed to order the air tankers.
And even when the feds fail to act, many states have their own statewide law enforcement investigative agencies, some more reliable than others, that at least offer the prospect of keeping the local police in line.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com