The transcripts for the Federal Reserve’s 2006 meetings were released this week, and with them comes the news that the people in charge thought that the housing crisis was pretty hilarious at the time, and that the biggest problem facing the economy was inflation. That is to say, that the economy was growing too damn fast! And maybe there was slight cause for concern, things that are too good to be true being not usually true and all that. Even so, Timothy Geithner, then the president of the Federal Reserve Bank of New York and now Secretary of the Treasury, thought in December 2006, mere months before the subprime mortgage crisis hit, that “the fundamentals of the expansion going forward still look good.”
The New York Times report on the transcripts does not beat around the bush about this: the meetings of that year, it writes:
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.
Government employees don’t know anything about anything? Amazing.
The Federal Reserve had plenty of information on what was going on in the housing market: that buyers were being enticed with Mini Coopers, for instance, and that properties were being dressed up so as not to look empty, even though they were. But instead of being concerned about this homebuilder-as-lobbyist behavior, the Reserve board, including the guy currently in charge of what happens to our tax dollars (“He’s been right there in the trenches,” Obama might maybe say of Geithner’s experience), made jokes about it. (There was one person less confident than the others: Ben Bernanke.)
The worst offender appeared to have been Janet Yellen, then the chairman of the Federal Reserve Bank of San Francisco. As Alan Greenspan was preparing to exit as Fed chairman, Yellen remarked:
It’s fitting for Chairman Greenspan to leave office with the economy in such solid shape. The situation you’re handing off to your successor is a lot like a tennis racquet with a gigantic sweet spot.
Awkward! The transcripts are here, for you to read in their entirety this weekend. [NYTimes via Daily Intel]
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This is good news for John McCain!
John McCain smells like a bacterial yeast infection!
" is a lot like a tennis racquet with a gigantic sweet spot."
The Dunlap Chris Christie tennis racquet. There's a big doughnut hole in the middle. You lose quickly, the helicopter picks you up and get back to eating festive buttery baked good quicker.
She meant to say "gigantic wet spot."
Welp, if the NYT reported it… it has to be… oh, wait.
No one could have known.
Yeah, I remember hearing a personal trainer at a gym in 2004 talk about how he was going to buy a HOUSE and get RICH.
Yeah, who could have known????
My mom owns several rental properties and I said "I think I want to buy a house and 'flip' it" to which she retorted "Why don't you just buy an emu farm shit for brains? You buy properies not to 'flip' but to hold on to…equity you shmuck, equity!" Mom always had the brains for real estate.
I take it you and your mom are not on speaking terms even though you are living in the basement of one of her properties.
You know who else likes a giant sweet spot?
Gov. Christie. (If you're talking about the middle of a Dunkin Donuts Boston creme.)
Willie Wonka?
Marcus Bachmannn?
Andrea Mitchell?
Larry Craig?
Tiger Woods?
Dubya for when we are watching his drive?
Barry Bonds?
That's his head.
The American Dental Association?
People who cruise parking lots for hours looking for an open space that is really close to the store so they don't to haul their fat ass an extra 100 feet?
Lindsey Graham
Cookie Monster?
Jenna Jameson?
Dick Cheney?
Oh, my bad, I thought you said giant skeet shot.
My Lil' Lady?
Customers of the Mustang Ranch?
Rick Perry, when jogging?
Hostess ™
And each of these clowns were and always shall be shunned by everyone for being so wrong.
** confers with reality**
Oh sweet fucking lord …
truth is stranger than fiction
…economic forecasting models that turned out to be broken.
The models were based on the Laugher Curve, obvsly.
To be fair, though, according to The Big Short by Michael Lewis, no one on Wall Street understood what was going on, either.
No one, that is, except for the few wizards who — by spending hundreds of hours painstakingly analyzing the actual underlying data about the mortgages, which no one else did, because of too-much-work! and don't-look-a-gift-horse — were able to turn Triple-B mortgages (near junk) into Triple-A securities (good as gold), with the willing and intentionally-deaf-and-blind collusion of the S&P, Moody's, and Fitch ratings agencies.
You know, the same guys who got their bonuses then, and are getting their bonuses now. Who would be not you.
Reminds me of a commentary by a TV critic, years ago, on the seductive nature of jargon, in the context of a TV studio. The place is full of people firing off buzzword phrases at each other ("Give me a shout when you're up to speed!"), -which convinces you they know what is going on – but, they don't. Only a tiny fraction of the people in any organisation have any idea of how the toys are really put together, and on Wall street, that fraction is, and has always been miniscule. Kind of touching that so many have such faith in such incompetent wankers…
AMEN brother/sister
As someone who plunked down a $50,000 down payment on a house in early 2007, I think it is the most goddamned fucking funny thing that has ever fucking happened. Oh, and did I mention …. FAWK!
2008 for me and yeah, fucking hilarious.
Are we the same person?
(Except in my case, late 2006).
U G H!!1!
I am not a witch, I'm you. Although for me it was early '06. Seriously. I am NOT a witch. Otherwise I would've cast some sort of housing market spell and sold while I could get some money out of it.
Me, summer 2006. In foreclosure now. Hohohoho!
2006 seemed to have been the top of the curve, at least here even in struggling Michigan. Housing was the only game in town, and it was good even in the bad parts.
So, this means Goldman Sachs took over the Federal Reserve before it took over Treasury and the oval office?
That's the Offal Office™, please. Must honor the Bain trademark.
Chris Christie should go on a diet and get more exercise.
It would be more fun to stick Christie with a pin and watch him explode like an overinflated balloon.
Or like putting a custard filled doughnut in the microwave.
Whoopsie?
I believe the official GOP term is oops….
Janet Yellen was gellin' at Greenspan's farewellin'.
…The situation you’re handing off to your successor is a lot like a tennis racquet with a gigantic sweet spot…
More like a ping pong paddle with moldy sand paper.
Funny, like Alan Greenspan's rigid belief in Ayn 'Social Security Collecting Parasite' Rand's philosophy that Government should do NOTHING TO PREVENT FRAUD???
FRAUD. Ha ha ha. That's FUNNY!!!!
There are predators, and their are prey. Why should the gubmint interfere in the natural order of things?
They are predators, and we are prey.
Well that makes feel way less guilty about stuffing younger versions of these bastards in lockers when I was in high school.
This is not an issue of not knowing – it's about not caring.
Geithner's laughing cuz Greenspan just farted out one of those old-guy farts.
But he'll stop laughing when he sees what's under the chair.
I'm sure we're all glad that pack of greed-head know-nothings got its just desserts and isn't in a position to cause any addition harm.
“I’d like the record to show that I think you’re pretty terrific, too,” Mr. Geithner said in adding his voice to the chorus of tributes at that final meeting."
I think we were all pretty sure that Timmeh didn't make it to the top of the heap by virtue of financial* talent.
*sound of lips smacking on butt*
The butt if we're lucky.
"It’s fitting for Chairman Greenspan to leave office with the economy in such solid shape. The situation you’re handing off to your successor is a lot like a tennis racquet with a gigantic sweet spot."
"Er….But Ben, be careful playing with those exploding tennis balls (the housing market)!"
Government employees don’t know anything about anything? Amazing.
Ahem.
Amen to the Ahem.
At the risk of repeating some else, or more likely myself…
When a bunch of federal officials start saying the risk of a double dip recession is essentially nill …. start packing your bags for another depression.
I apologize for the weak metaphor.
Today we are all weak metaphors.
Because it is Friday the 13th or because there is a picture of the Sect. Of Homeland Spying at the top of the page?
Today we are all metaphorically weak.
The problem was not a lack of information; it was a lack of comprehension
Today we are all inundated with information – - basking in it, trading in it as kids with a make-believe currency – - and still lacking comprehension.
ha, when I was a kid all we had were easy bake ovens! We sold little cakes for 50 cents door to door, i am not shitting you.
Huh?
"The situation you’re handing off to your successor is a lot like a tennis racquet with a gigantic sweet spot."
I'm not sure that's elitist or accurate enough. maybe should've gone with:
The situation you’re handing off to your successor is a lot like a seersucker suit with a giant shit stain on it.
Or a hand grenade with the pin pulled?
Why not "The situation you’re handing off to your successor is a lot like the subtle gleam of a 5 pound diamond bracelet as it encircles your wife's arm in the flickering light of the fire in the one of 26 giant fireplaces of one of your 14 fifteen gajillion dollar mansions." ?
Greenspan could probably relate to that.
This is clearly all Obama's fault.
Meh. What they missed (or didn't know) was that a huge fraction of the mortgages propping up the housing bubble were pure, criminal, fraudulent crap. The con artists who spun that shit into AAA-rated gold got bonuses instead of jail time. (And Wall St. wonders why the 99% despise them?)
The FBI told them about it but they refused to listen.
Then brought up a law from the 1800's to squash the FBI inquiry.
They did realize the housing market was slowing down and were actually happy about it thinking money would then move from housing to other parts of the economy that were already stalling out. EXCEPT, people weren't using money to buy houses at that point, it was credit. Hence, big bubble go burst. Oops.
How could the people who control the money supply know about a credit bubble? Unpossible.
The situation you’re handing off to your successor is a lot like:
that bowl of stuff that's been sitting in the refrigerator since July.
See, New York Times? That wasn't so hard, was it?
See above.
Ok, so let's hear some of the hilarious jokes!
There once was a lady from Ealing,
Who protested she lacked sexual feeling,
Til a cynic named Boris,
Touched her Clitoris,
And then scraped her off the ceiling
Knock Knock…
Who's there…
Sheriff's dept you have 20 min to grab all your shit and get out your home has been forclosed.
Next thing you know we'll have some Paulturds in here saying: "Nah, nah, told you so."
Except that the Ronulans want it exactly this way. Let everyone try to screw everyone else, and you can sue if you don't like it.
Are these the same guys who all sat around, during the Enron fiasco, cracking jokes about how Granny was gonna freeze to death come winter? hee hee, that was high-larious also!
A real kneeslapper!!
"The situation you’re handing off to your successor is a lot like a tennis racquet with a gigantic sweet spot."
As someone who enjoys tennis as a hobby…THAT MAKES NO FUCKING SENSE!
You've never played single-racquet doubles?
Like the housing bubble, it always ends badly.
I think she meant to say "a football team that's all quarterbacks".
Oh, hell, I remember in 2004 or so, Greenspan out of nowhere issues some statement that poor people should make use of the new, creative mortgages more, ARMs and negative amortization and interest-only mortgages. Not like he was fanning the flames of what was obviously a bubble or anything. I read a long article about Greenspan, in one of those reputable publications, written by someone reputable, which went over his history and pointed out that Greenspan has NEVER been right about ANYTHING, EVER. For which performance he has been greatly rewarded. I need a drink.
Well we could ask the ghost of Ayn Rand if he was any good in bed.
I do hope you have something nearby to wash the barf off of your Ouija board.
Was this about the same time George W. Bush was pushing the "Ownership Society"?
Yeah, this is definitely Obama's fault.
I’m calling Bullshit, I sell to several big Wall Street companies that are in the information business. In late 2006 they started canceling orders and pulling in their horns. I was told that 2007 was going to a crap year and at the time I thought they were nuts. Next time this happen I am cashing out my 401k and buying canned goods and ammunition.
I worked on some long/shorts back in the day. Just Google "quants august 2007" and see what pops up. The real money movers knew things were bad and were betting accordingly.
Did you read HistoriCat's linkie from Paul Krugman several comments downthread? From Paul Krugman:
"Second, some of the same people you read in these transcripts dismissing risks to the real economy and worrying wrongly about inflation are still making policy pronouncements, in which they … dismiss risks to the real economy and worry wrongly about inflation."
I'm hitting Costco tomorrow and the local gun shop on Monday.
And the whole time, Paul Krugman was predicting imminent housing market collapse and recession in his columns but everyone with the power to do anything ignored him.
That's why Paul Krugman is tired of trying to reason with you people.
I wish that people ignored him. Most of the righties openly mocked him. I'm social friends with several colleages in the Economics department of BIg Research U. They couldn't hide their delight at what they perceived to be embarrassing (to Krugman) obsessive preaching about a housing bubble. They were tickled with schadenfreude at the idea of one of the profession's big shots being taken down a peg or two in such a public way. And these are highly regarded people – two of them are constantly being flown out to testify to Congress, turn down prestigious offers every year, etc.
My respect for economists as a class, never all that high, fell through the floor during that time. (Though of course there are many individual economists who produce thoughtful, intelligent, illuminating work well worth reading.)
Faith-based economics -just ignore any data which doesn't correspond with with your version of reality. I think Paul Krugman summed it up nicely.
But isn't Paulie a soshulist?
Today we are all soshulists!
Geithner is an incompetent, greedy cunt. That is all.
one man who actually earns the name.
Yeah, he is one of at least two giant sociopaths in the Obama administration. Just listen to him talk, you can tell he doesn't have a shred of humanity in him. The other is Susan Rice, ambassador to the UN. She scares the be-jebus out of me. Total psycho.
No snark, Geithner is the reason that I believe Obama's biggest flaw as a manager is that he is a lousy director of personel (and judge of character). And I've known otherwise smart people who couldn't tell a Cheney from a Bernie Sanders.
Kevin Phillips' American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century, published in 2006, predicted a giant credit bubble based on inflated housing values and unregulated credit instruments. And he is a Republican! Pretty interesting reading; too bad no one paid much attention when it was published.
Yeah, I can't stand the little puke.
Kevin Phillips wrote several books in the first decade of this century in which he essentially admitted that the "Emerging Republican Majority" he championed in the late 60s turned out to be a pile of shit. I believe he is still nominally a Republican, but he is a severe critic of the financialization of the American economy that occurred under the Repubicans (and the Republican-lite Bubba Clinton).
Ironic that he helped mix the Kool-Aid, but ultimately refused to drink it.
"Government employees don’t know anything about anything?"
I think you mean "political appointees."
Anyway, "the fundamentals of our economy are strong."
This Economy has been deleted by overpaid shitheads.
Yeah, that "giant sweet spot" was Ben Bernanke's ass. One thing's for sure, none of these folks missed any meals while the rest of the country was wondering how to pay the rent.
"It’s fitting for Chairman Greenspan to leave office…after taking such a solid on the American People". FIXED!
Geitner needs a green suit and a pipe to go with his bucket of gold coins.
When we moved to Canada in February 2006, we sold our Los Angeles area $150,000 condo for $330,000 (after living there for only 3 years) which was $20,000 less than we were asking. At the time, I thought to myself, "Huh, I bet that bubble doesn't have much longer."
If only Geithner or Greenspan had thought to ask me.
what the fuck is tennis? really.
I wish Obama would like to be able to fire Timothy Geithner.
The Federal Reserve was passed on a holiday weekend in 1913 . The Fed is simply secret bankers who bribed the politicians who passed the income tax in 1913 to fund this scam.
It is no wonder the bankers were laughing , they screwed the people of their wealth and then bailed themselves out …Our founding fathers warned us and Ron Paul is right folks.
The printing of fiat currency creates inflation which robs the poor and destroys the middle class and transfers the wealth to the banks…The banks s c r e w e d us in two ways folks that is why they laugh.
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children wake up homeless on the continent they conquered.”
― Thomas Jefferson
And, nearly two years later, right when the economy was falling off the cliff, one John McCain uttered nearly the exact same sentence. Pride really does precede a fall.
I'm not sure I buy – especially the more we get to know about this issue – that they (the regulators) missed or didn't know what was going on. This was a failure of wanting to know or be told what was going on behind the curtain, in the very best scenario, or a vast, grand conspiracy between regulators and financiers, in the very worst scenario.
Ignorance can be bliss even when you feign it. The best kind of bliss is not knowing, but even putting off knowing yields a certain high. It may be bad weed, but it's weed, nonetheless.
"This Time is Different", a fat economics book, gives the history of how policy makers have gotten the economy wrong for at least 800 years but the title sums it up perfectly. This time is always different from the last recession/depression/collapse because we have better technology or more controls or are just smarter than they were in the old days.
So everyone misses the obvious signs and we are fucked again.
AWESOME FLIC! Just sayin'.
The very best of the 50's paranoid Giant Radioactive Monsters flicks, IMHO. They went careening downhill from there.
I liked the Giant Radioactive (telepathic) Crab Monsters that ate the island one, but for very different reasons. Cheepnis!
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