I’ve learned a few lessons in my more than 30 years of observing, analyzing and writing about the economy — including how to assess matters during a crisis.

First, don’t react in a knee-jerk fashion, believing the issues and causes are immediately clear. And don’t put too much stock in those who proclaim they know what’s going on.

Second, understand some crises will be short-lived — having little lasting effect and largely forgotten, sometimes in relatively short periods of time — while others will run deeper and have more lasting effects. During the first days of a crisis, it can be difficult to figure which path we might be headed down.

Third, markets work well. When market participants make bad decisions, those decisions must be rectified or resources will get reallocated to endeavors that make economic sense. That is, markets are self-correcting.

Fourth, crises in the marketplace oftentimes find at least part of their origins in misguided governmental policies that distort incentives and decisions. For good measure, political solutions to crises often wind up making matters worse or fail to address the actual causes of a crisis.

The actions of the Federal Reserve in setting monetary policy over the past 15 years have once again come into focus. The Fed ran unprecedented loose money from the late summer 2008 to late 2021. While this created underlying policy uncertainty for a variety of reasons, the loose money failed to generate higher inflation. Instead, bank reserves exploded. Then the pandemic hit. Government doled out support checks, sustaining and even increasing demand. But businesses shut down. Then supply chains were overwhelmed or seized up as things opened up.

That perfect storm of loose money and supply challenges combined with robust government money ignited inflation. In turn, interest rates increased, especially with the Fed’s misguided attempts to slow the economy by dramatically pushing up the Federal Funds rate.

As The Wall Street Journal explained, after the 2008 crisis, government – that is, politicians and regulators – made clear that Treasury bonds and mortgages backed by Freddie Mac and Fannie Mae were the keys to banks passing muster in terms of capital standards. After all, these securities have low default risk and can be easily bought and sold. Then inflation hit and interest rates spiked, again thanks to the Fed, and the value of these “safe” securities plummeted. Depositors saw this with the Silicon Valley Bank and headed for the doors. Whoops.

As the Journal stated: “U.S. accounting rules allow banks to avoid recognizing losses on assets they declare they’re holding to maturity, while they must mark to market assets they designate as ‘available for sale’ in case of distress. That mark-to-market requirement for liquid assets should give banks and regulators a clear view of the value of their liquidity cushions. But it creates an incentive for banks to shift more assets into the hold-to-maturity pool as interest rates rise. SVB was an extreme case in designating an outsized proportion of its assets as hold-to-maturity, meaning it faced crippling penalties if it had to sell bonds to satisfy deposit withdrawals.”

The fallout from regional bank problems could hurt small businesses. Regional banks are big lenders to small businesses. And if this episode translates into those regional banks becoming more cautious in lending, small businesses could face constraints in accessing credit. That, in turn, adds to concerns the U.S. is heading back into a recession and how deep the recession might be.

As for the Silicon Valley Bank and Signature Bank failures, the Fed has stated it will make depositors whole even beyond the federally insured limit of $250,000. That ramps up the moral hazard risks in the system. For good measure, increased costs for the Federal Deposit Insurance Corp. fund will be felt beyond just banks themselves. That’s contrary to claims by President Joe Biden, given that increased insurance premiums paid by banks mean either less resources available for bank lending or higher fees for customers.

Facing considerable criticism for missing the warning signs, the Fed announced it plans to reassess its supervision of Silicon Valley Bank. The Associated Press reported that Michael Barr, the Fed’s vice chair for supervision, will lead the effort. Barr said, “We need to have humility and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience.”

That would be refreshing. Will the Fed get something right? Don’t hold your breath.