Inside the Charming Brain Trust of the Federal Reserve

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.