photo credit: trackrecord
On Thursday, January 12th, the Federal Reserve released the transcripts of the meetings of the Federal Open Market Committee of 2006. Most of the country already agreed that the Fed missed blatantly obvious signs of the about-to-burst-housing bubble, but the LA Times argues that the transcripts, "reveal in painfully embarrassing detail the high degree of overconfidence and lack of foresight just ahead of the real estate collapse and financial crisis that engulfed the nation." The transcripts illustrate that Ben Bernanke, Fed Chairman, as well as Timothy Geithner - now the Treasury secretary, but at that time, the president of the New York Fed - gave no heed to the warnings, but instead, repeatedly "expressed their confidence in the economy" over and over and over again.
The LA Times reported that when he was still the president of the Federal Reserve Bank in New York, Timothy Geithner said, "We believe that, absent some large, negative shock to perceptions about employment and earned income, the effects of the expected cooling in housing prices are going to be modest."
In December 2006, a year before experts say the recession began, Bernanke is reported to have said that the nation's economy would experience "a soft landing," meaning that "growth would slow enough to cool inflation but not drop into a recession." The Wall Street Journal reported that Mr. Bernanke claimed, "Again, I think we are unlikely to see growth being derailed by the housing market, but I do want us to be prepared for some quarter-to-quarter fluctuations."
