If the Fed Missed That Bubble, How Will It See a New One?

New York Times:

So let’s consider what an empowered Fed might have done during the housing bubble, based on the words of the people who were running it. In 2004, Alan Greenspan, then the chairman, said the rise in home values was “not enough in our judgment to raise major concerns.” In 2005, Mr. Bernanke — then a Bush administration official — said a housing bubble was “a pretty unlikely possibility.” As late as May 2007, he said that Fed officials “do not expect significant spillovers from the subprime market to the rest of the economy.”The fact that Mr. Bernanke and other regulators still have not explained why they failed to recognize the last bubble is the weakest link in the Fed’s push for more power. It raises the question: Why should Congress, or anyone else, have faith that future Fed officials will recognize the next bubble?

via Economic Scene – If the Fed Missed That Bubble, How Will It See a New One? – NYTimes.com.

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