In his second meeting as chairman of the Federal Reserve in May 2006, Ben Bernanke heard a Fed governor warn about the nation’s mortgage market. But Mr. Bernanke described the cooling of the housing boom as a “healthy thing.”
“So far we are seeing, at worst, an orderly decline in the housing market,” he said.
Mr. Bernanke’s words were contained in 1,197 pages of transcripts released Thursday of closed-door Fed meetings from that year. The transcripts paint the most detailed picture yet of how top officials at the central bank didn’t anticipate the storm about to hit the U.S. economy and the global financial system.
May 2006. Plenty of clues were around. Mortgages were being written for anyone with a pulse. Property flips were in full flight. Demand exceeded supply in many markets and prices responded predictably. Mortgage service companies popped up like dandelions after a spring rain. And on and on and on; and here the so called “smart people” saw nothing more coming than an “orderly decline”.
And who ended up getting the tab for their wrong headed conclusions? All 50% of us who pay taxes.