With the failures in the subprime markets now roiling the global economy, what did the leader of the Federal Reserve Board have to say about it? Like the rest of this administration, it held closely to a reality devoid of facts. There was nothing that the markets can't handle and laissez-faire economics was the philosophy of the day. Here are some of Federal Reserve Board Chairman Ben Bernanke's quotes from the New York Times:
March 1, 2007
Mr. Bernanke acknowledged concern about the subprime market, where several lenders have closed and others have been forced to increase reserves for bad loans.
But the Fed chairman said he saw no sign yet that problems with subprime mortgages were leading to problems in the broader economy.
March 29, 2007
Ben S. Bernanke, the Federal Reserve chairman, said Wednesday that he did not expect the escalating problems in the mortgage lending business to spread to the rest of the economy, but noted that the Fed had given itself the ''flexibility'' to adjust interest rates should the outlook change for better or for worse.
Nothing to see here, move along.
Many economists have expressed concerns that trouble in the subprime market could worsen the slump in the housing market and, in turn, cause the economy to stall.
But Mr. Bernanke said the Fed believed that was unlikely to happen. ''The impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained,'' he said.
May 18, 2007
The Federal Reserve does not foresee a broader economic impact from the growing number of mortgage defaults and home foreclosures, its chairman said yesterday. And he cautioned that heavy-handed regulation of lenders could have the unintended effect of adding to the strain on the troubled housing market.
Will the subprime crisis spread? You must be crazy.
Some economists fear this belt-tightening by mortgage lenders could spread beyond the subprime market and into the prime mortgage area, making it more difficult for people with average credit to get loans. Mr. Bernanke did not appear to share this view.
''The vast majority of mortgages, including even subprime mortgages, continue to perform well,'' he said. ''We believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy.''
Now, get a load of this:
On March 29, 2007 in a Senate hearing, Bernanke was not a big fan of regulating subprime mortgages:
In the hearing on Wednesday, Senator Charles E. Schumer, Democrat of New York, said he planned to introduce legislation that would establish a national regulatory system for mortgage brokers.
Mr. Bernanke said that he believed ''it's worth looking at'' whether Congress should give the Fed the authority to enforce regulations on mortgage lenders that are not part of a banking institution.
''Although we have the authority to pass these rules, we still have the enforcement issue,'' he said. ''Our enforcement powers do not extend beyond the banking system.''
But broadly, the Federal Reserve chairman said that imposing government restrictions had the potential to damage the housing market. He said financial institutions were already tightening their lending standards, which would eventually bring the housing market back into balance.
In the short term, though, tougher lending standards could further reduce the demand for housing and add to the bloated inventories of unsold homes.
But four months later, on July 19, Bernanke was singing a different tune:
Separately, Mr. Bernanke acknowledged that regulators needed to impose new rules on subprime mortgages -- those made to people with weak credit -- saying that the explosion of exotic mortgages in recent years was accompanied by lax underwriting standards, abusive lending practices and some cases of outright fraud.
Not that Bernanke was any different than his peers. Since the crisis began to bubble in March, many economists told us not to worry. And why should we? The U.S. bailed out the savings banks under Reagan. And yesterday, the Fed was busy bailing out the mortgage bankers who, by Bernanke's own admission, were running a Ponzi scheme.
Next step? Blame the Democrats.