To be sure, the just-released transcripts of the Federal Reserve meetings from 2006 do not look so terrific with the benefit of hindsight. But don't just point and laugh; you should read a bit of the transcripts yourselves. What you'll see is a very sophisticated group of people assimilating enormous amounts of information. The math and deduction that would predict the events of 2007 and 2008... well, who among us was banging that drum in mid-2006? (Okay, a few people!) But even those of us with anecdotal data—I, for instance, knew something was wrong with America when a friend who was an unemployed non-citizen immediately got a rather enormous interest-only mortgage on a vacation house!—weren't exactly raving like Cassandra. And the Fed transcripts aren't all ridiculous. Susan Schmidt Bies, who retired from the Fed in March of 2007, and then went on the Bank of America board, made a presentation on CDOs, mortgages and mortgage servicers at the Fed meeting on December 12, 2006.
In fact Bies, though she later threw herself on a (fairly small) sword with apologies, was warning about "easing of underwriting standards" in the summer of 2005. (Along the way, she did certainly draw some wrong conclusions.)
Also the Fed meetings are charming, really—a room full of witty, well-educated, well-prepared people. So Alan Greenspan's legacy of deregulation, exercised as Chairman of the Fed from 1987 to January of 2006, is actually a disaster in practice, but at least we knew that was coming. Still, let's remember him for a moment as he was, on the edge of a glorious retirement.
In worse news from the transcripts, Tim Geithner comes off pretty bad. Again. Good thing he's secretary of the Treasury! Blech.
i have a pitchfork and a torch. just say the word.
You know, Elizabeth warren could really ratfuck Geithner if she were predisposed to that. In her Senate race, which will be one of the most closely watched, she COULD make Geithner an issue. That would force Obama, who has already signalled that he is going to veer left into 99% philosophical territory, to fire geithner's scrawny ass. #justsayin
Some of the principals have since gone on to work at the hedge fund of Echo and Chamber.
I knew something was wrong in 2006 when my ex-husband's pot supplier, drug-kingpin took a side job as a mortgage broker and made all kinds of money putting people into mortgages who had no business being there. I also looked askance back in 1994 when I read about home mortgages that were no only down-payment-free but would bundle in the cost of hoped-for renovations on the property! Yikes! Big-time negative equity going in. WTF!?
There were a handful of experts who were raving like Cassandra in 2006, but almost nobody would listen to them. Off the top of my head, you could include: Nouriel Roubini, Robert Schiller, Nassim Nicholas Taleb, John Mauldin, and Barry Ritholtz.
As far as I can tell, the biggest reason nobody listened to them is because they were a particularly lonely tribe of independent-minded finance types and economists -- they didn't work for the big investment banks, and they didn't work for the Fed. They might've been able to make common cause with the left, but back then not that many people on the left wanted to read all those super-boring details about the economy.
I remember this immensely well, because most of my friends are lefties, and back in 2006 I was trying to tell all of them not to buy real estate.