The big papers go page one today, as they should, with reports on newly released transcriptions from 2006 Federal Reserve meetings—devastating documents of the failure of top economic policymakers to understand what was happening in the economy.
The New York Times’s Binyamin Appelbaum spent much of yesterday providing an entertaining live feed of his reading of the transcripts. This morning he turns the tweets into an excellent page-one story. The Washington Post leads with the Greenspan angle, for some reason, quoting a nauseating Tim Geithner paean to the onetime Maestro. The Wall Street Journal’s story reads like access journalism, a mild treatment of an embarrassing disclosure.
It’s worth remembering that Appelbaum, just months after the Fed’s meetings, was at the Charlotte Observer showing how disastrous the housing crash would be, fraud and all.
It’s of course true that it was impossible to know exactly how a housing crash would play out, but it was clear that it was going to be a big problem. The NYT’s lede zeroes in on the nearsightedness of the Fed. These were basically captains of the Titanic, oblivious to the possibility of disaster:
As the housing bubble entered its waning hours in 2006, top Federal Reserve officials marveled at the desperate antics of home builders seeking to lure buyers.
The officials laughed about the cars that builders were offering as signing bonuses, and about efforts to make empty homes look occupied. They joked about one builder who said that inventory was “rising through the roof.”
But the officials, meeting every six weeks to discuss the health of the nation’s economy, gave little credence to the possibility that the faltering housing market would weigh on the broader economy, according to transcripts that the Fed released Thursday. Instead they continued to tell one another throughout 2006 that the greatest danger was inflation — the possibility that the economy would grow too fast.
The Times says Chairman Ben Bernanke expressed the most reservations about the optimism on housing, the economy, and the financial system—although these look more like hedges on Bernanke’s part than real concerns. The Post and Journal point to Fed Governor Susan Bies, as the “Cassandra” and “most attuned to the brewing trouble,” but that in itself is revealing if you read the Times. It alone quotes her saying this:
“I really believe that the drop in housing is actually on net going to make liquidity available for other sectors rather than being a drain going forward, and that will also get the growth rate more positive,” Ms. Bies told colleagues at the committee’s June meeting.
But Tim Geithner looks particularly ridiculous in these stories. I like the subtle wit on display here in the Times:
Mr. Geithner suggested that Mr. Greenspan’s greatness still was not fully appreciated, an opinion now held by a much smaller number of people.
The Journal quotes him saying this:
“Our recent financial-market data don’t, in my view, provide a convincing case for a substantial increase in the probability of a much weaker path for growth going forward,” Mr. Geithner said at a meeting in December 2006.
And the Times quotes him saying “We think the fundamentals of the expansion going forward still look good” at the same meeting.
Which points to something that stands out here: the utter lack of consequences most of these people have faced for their failures. Obama made Geithner his Treasury Secretary, and the president begged him to stay on last year when he thought about leaving. Obama re-nominated Bernanke to chair the Fed. He nominated Yellen to be vice-chair of the Fed. Bies is on the board of Bank of America. Greenspan is semi-disgraced, but still writes op-eds for the Financial Times.
These are the people running country’s financial and economic policy. Where are the people who got it right?
The Journal quotes an economist defending the Fed and leaves it unchallenged:
On Thursday, after the transcripts were released, some analysts expressed sympathy for the Fed. Pierpont Securities chief economist Stephen Stanley said the Fed’s view at the time “was a pretty consensus view” among analysts.
Sure, Krugman saw the bubble, years before it burst. But Krugman, like any Good Keynesian, also favored the artificial boom from the get-go because he, like any Good Keynesian, believes that such booms could be, and should be, maintained.
Yet the MSM and CJR still loathe to credit those who recognized the phony boom in its infancy; explained, precisely, how it came about and why it was doomed to fail; and therefore opposed it root to fruit. http://www.youtube.com/watch?feature=player_profilepage&v=XDKWm92EvhU#t=369s (part 1 of 3).
"When the economy sinks, the rhetoric for sound policy and a strong dollar may continue, but all actions by the Congress and the Fed will be directed toward re-inflation and a congressional spending policy oblivious to all the promises regarding a balanced budget and the preservation of Social Security and Medicare trust funds." -Ron Paul, 9/6/2001
Right all along but expose us as fools and tools? You don't exist! And if you must exist, then you're a kooky extremist conspiracy nut!
Wrong all along but confirm our worldview? You deserve a NYT column, a Nobel, and uncritical reverence!
#1 Posted by Dan A., CJR on Fri 13 Jan 2012 at 07:41 PM