Federal officials laughed at warning signals, and gushed that Alan Greenspan was totally awesome as the economy headed towards the biggest iceberg in about 70 years. Reading the Federal Reserve transcripts- available here - was much like watching "The Titanic," without the Grammy winning theme song or the romantic sex scenes between Kate Winslet and Leonardo DiCaprio.
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.”
Some officials, including Susan Bies, a Fed governor, suggested that a housing downturn actually could bolster the economy by redirecting money to other kinds of investments.
And there was general acclaim for Alan Greenspan, who stepped down as chairman at the beginning of the year, for presiding over one of the longest economic expansions in the nation’s history. Mr. Geithner suggested that Mr. Greenspan’s greatness still was not fully appreciated, an opinion now held by a much smaller number of people.
Meanwhile, by the end of 2006, the economy already was shrinking by at least one important measure, total income. And by the end of the next year, the Fed had started its desperate struggle to prevent the collapse of the financial system and to avert the onset of what could have been the nation’s first full-fledged depression in about 70 years.
The transcripts of the 2006 meetings, released after a standard five-year delay, clearly show some of the nation’s pre-eminent economic minds did not fully understand the basic mechanics of the economy that they were charged with shepherding. The problem was not a lack of information; it was a lack of comprehension, born in part of their deep confidence in economic forecasting models that turned out to be broken.
I had friends already losing their jobs and homes in 2006. The people who should have been looking out for us, they were laughing. George W. Bush even put a medal on Alan Greenspan.
Timothy Geithner is, as you're probably all aware, our Secretary of the Treasury, and Ben Bernanke our current Chairman of the Federal Reserve, as well as the central bank of the United States.
Alan Greenspan (Or Mr."Terrific" as Geithner referred to him) is the former Chairman of the Federal Reserve of the United States from 1987 to 2006, first appointed by Ronald Reagan. Greenspan held economic views influenced by Ayn Rand, need I say more? Probably not, but I will. He also supported the idea of the privatization of Social Security, and deficit-spurring tax cuts.
Senator Harry Reid (D-NV) once referred to Greenspan as “one of the biggest political hacks we have in Washington.”