During a committee meeting held during August of 2007, Ben Bernanke, the Chairman of the Federal Reserve said the odds were that the market was going to stabilize
January 20, 2013 – Transcripts that have just been released show that officials from the Federal Reserve largely missed the oncoming financial crisis that was hurtling toward the U.S. like an out of control freight train during 2007.
Even as Fed officials worried about how the financial markets were doing and the evidence that a mortgage meltdown would take place mounted, the majority of the members of the Central Bank were unaware during that year what the extent of damage the crisis would dish out.
During a committee meeting held during August of 2007, Ben Bernanke, the Chairman of the Federal Reserve said the odds were that the market was going to stabilize.
The St. Louis Federal Reserve Bank President William Poole echoed Bernanke’s sentiments at the same meeting. He said his own bet was that the volatile financial market was not going to change fundamentally, what was taking place in the actual economy.
However, red flags were sent up by some policymakers. Richard Fisher the President of the Dallas Federal Reserve said in June of 2007 that the trouble in Bear Stearns created enormous risk. However, the others present brushed the concern off. Janet Yellen then the President of the Fed in San Francisco called the troubles in the housing market, the big 600 pound gorilla that was in the room.
Even though signs started becoming worse and worse during the summer, Bernanke seemed to be reluctant to move to soon. At the meeting of the Fed in September of 2007 Bernanke said the Fed’s business was not bailing businesses or individuals. By the end of 2007, the Fed began to view the economic situation as being more and more grave and more aggressive measure were needed to stave off a crisis.
The extent of the crisis was still not recognized as Bernanke said at a December Fed Meeting that he did not expect near insolvency or insolvency amongst the major financial institutions. However, the economy had already started to spiral down into the Great Recession.