Was the Fed duped?

Early last week it seemed as though the world, or the financial world at least, was coming to an end rather quickly. Global markets sold off heavily and for no apparent reason other than concerns of the US recession. In response to this the US Federal Reserve cut interest rates by 75 basis points- the biggest cut in 30 years.

Then it was revealed that a rogue trader had caused the market shock by making bogus trades. The resulting market forces of his company unwinding those trades led to the market sell off.

Now if you are like me, there is some serious injustice here. First, where are the repurcussions to Societe Generale, the firm he worked for? Other than losing £3.5 billion, there needs to be something. Second, what about the Fed? Were they duped into action by this? They say in the press that they stand by their decision but they still look a little foolish. Why was such a huge cut needed? In order to restore confidence- the very confidence they undermined, they should begin raising rates again. Ben Bernake has to understand that his stakeholder base extends far beyond wall st to middle america. The amount of the rate cut is not commensurate with the other rhetoric about the state of the US economy overall. The economy is just not as bad as a 75 point cut would lead you to believe.