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Economists Who Missed the Housing Bubble Give Low Marks to Bernanke
That wasn't the headline of the WSJ article, but perhaps it should have been. I've had plenty of complaints about Bernanke's conduct myself, but the reality is that Bernanke took over the command of the Titanic just before it reached the iceberg. There was no way to steer clear at the point he took the helm, although he could have tried to lesson the damage (e.g. crack down on the abuses in the mortgage market and start yelling about the bubble from day 1).
Anyhow, there is something offensive about seeing these economists, every one of whom somehow managed to overlook the growth of an $8 trillion housing bubble, criticize Bernanke. What would they have done differently? In the interest of full disclosure, reporters should point out that their "experts" missed the housing bubble. Also, those who have been around long enough missed the stock bubble as well.
--Dean Baker
COMMENTS (6)
Could not have said it better myself.
Posted by: Ditto | February 7, 2008 10:06 PM
Dean: You're not being fair to say NONE of the economists in the WSJ survey noticed the housing bubble. You may have been first, but others had joined you by late 2004 or early 2005. Off the top of my head, I'd argue that Jan Hatzius, Mark Zandi, Ed Leamer, David Rosenberg and Ian Shepherdson, among others, were talking about a bubble long ago. Even David Berson of Fannie Mae was warning about it.
For example, here's David Rosenberg from 2004: If consumer confidence does indeed weaken because of the housing market, one might expect investigations into mortgage lenders and real estate agencies."
Rosenberg, like Baker, was too early!!!
Posted by: Rex | February 8, 2008 6:28 PM
Rex,
I can't vouch for every comment that every person among the list of economists criticizing Bernanke made, but I really doubt that any of them not named Robert Shiller or Nouriel Roubini actually warned of the bubble.
I'll take Mark Zandi as an example. For the record, I consider Zandi a decent guy and a good economist. Nonetheless, I was on a panel with him about a year ago in which he was very dismissive of the idea that a collapse of the housing bubble will cause a recession. In fact, I am quite certain that he made a few comments in the last two months in which he still only viewed a recession as a possibility.
Zandi did recognize problems in the housing market, unlike many in this group, but he did not appreciate the size of them. If he did, he would have been using his very sizable megaphone (he is one of the most frequently cited economists in the country) to warn of the iceberg ahead.
I may live in Washington, but I am not interested in CYA economics. If you saw an $8 trillion housing bubble, then you had an obligation to warn that the Titanic was going to sink. Zandi was among those saying that the Titanic was doing just fine. I would have liked very much to have him among my allies in raising the alarm. Maybe more people would have paid attention.
Posted by: Dean Baker | February 9, 2008 6:14 AM
Bernanke himself was on the Fed Board of Governors from 2002-2005, and then chair of Bush's Council of Economic Advisors. Did he himself say anything about the housing bubble?
Posted by: anton | February 14, 2008 8:53 AM
Great article
Posted by: hoteles | May 28, 2008 6:56 PM
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Posted by: 高压锅炉管 | October 28, 2008 5:37 AM