Newly released transcripts show Fed misjudged housing bubble
Federal Reserve Chairman Ben Bernanke and most of his colleagues showed little concern when house prices started to decline in 2006, predicting “a soft landing” in the then-strong U.S. economy, transcripts from the central bank released Thursday show.
Bloomberg News Fed Chairman Ben S. Bernanke
Bernanke, who took over from Alan Greenspan as Fed chairman in February 2006, is cautious in making forecasts about housing and the wider economy. But, together with then New York Fed chief Timothy Geither, he believes the slowdown in housing is healthy and likely to end well.
Few central bank officials look overly worried just a few months before the storm hit, leading to the worst recession since the Great Depression. There are exceptions, however. At the May 2006 meeting, for example, Fed Governor Susan Bies brings the discussion back to housing and her growing worries about mortgages. At the following meeting in June, Janet Yellen, the Fed vice chairwoman who headed the San Francisco Fed in 2006, appears to be the most concerned about housing.