The general population may not know exactly what caused the crisis any more than Ignatius does, but they do know that Bernanke and Geithner were instrumental in handing $700B to Wall-street banks so they could pay big bonuses.

Ignatius parrots the group-think elitist consensus that the bailout saved the World, but there is no objective evidence to this effect. There is no reason for the general population to buy this, and for the most part they do not seem to be doing so.

Why is this Middle-East specialist pretending to know
economics?

It reminds me of a time when a famous man had to resign from office, and Mark Levin and Laura Schlesinger got together to blame all his missteps on . . . his wife.
No sense in it. I could only suppose that they identified more with the famous powerful guy than with the long-suffering person at his side. So is it possible that Ignatius identifies more with rich, famous and powerful Bernanke than with the long-suffering American people? To the point of suppressing any instincts that he was out of his depth?

Good point but bad analogy.

Also, isn't the Fed's low interest strategy depressing consumer sales (via deflation)? This then slows inventory turnover and reduces manufacturing needs. The old inflation will save us bit from 1933.

You'd fault anti-elitism? One supposes you'd to prefer endorsement of the neigh-on universal condescension of the academy toward the rest of us, particularly among its females? Thank you, no. I've had quite enough of the human fall out from the social engineering that has paraded under the banner of "progress" and emerged from these precincts over the last several decades. When people like Hitlery Clinton, as she so frequently does, or Michelle Obama as she did just a couple of days ago, publically hold themselves out as suitable models for the young my stomach turns. A little more sustained unemployment and, one day, these supercilious maggots might find themselves on public trial. Then, perhaps, we'll better assess the value of an education to our young.

I agree with AD. The last sentence of your post might as well read, "Just to be clear, the title of this post is total BS."

The proper 9/11 analogy would compare the Fed's behavior to that of the Bush administration in 2001. While they didn't carry out the attack, their incompetence and ideological blindness allowed it to happen.

Interestingly enough, the Fed ignored repeated warnings that the collapse of the bubble was coming just as the Bush administration ignored repeated warnings about the 911 attacks before they happened.

The article in question showed how out of touch Ignatius is with anyone who is outside his elite bubble. During the freefall, there were plenty of people who were criticizing the Fed. It reminds me of the people who justify their support for the Iraq war by saying that "everyone thought that Saddam had WMDs" despite the fact that the Bush regime knew for a fact that he did not, and most people at the antiwar rallies didn't buy it for a second.

The Bush adminstration believed in Iraqi WMD in 2003. Their error was a lack of concrete evidence to bolster their world view.

libhome is making the same mistake; other than his worldview, there is no evidence that Bush top level people "knew for a fact that he did not." If that was true, libhome could answer as to who is he talking about, how they knew Saddam did not have these weapons, and how he knows this "fact".

Russert: Let me turn to Iraq. And this is the whole idea of what you based your decision to go to war on.
President Bush: Sure, sure.
Russert: The night you took the country to war, March 17th, you said this: "Intelligence gathered by this and other governments leaves no doubt that the Iraq regime continues to possess and conceal some of the most lethal weapons ever devised."
President Bush: Right.
Russert: That apparently is not the case.
President Bush: Correct.
Russert: How do you respond to critics who say that you brought the nation to war under false pretenses?
President Bush: Yes. First of all, I expected to find the weapons...

Feb 8th, 2004, Meet the Press Transcript

Yeah, I'm with AD & Cowpunk. A perfectly good and irrefutable point is made, but the majority of people, if they were to read this, would instantly be repulsed by the analogy and dismiss the contents of the rest of the post.

I wouldn't blame Bernanke for the financial crisis directly, but be deserves to be blamed for his utter failure to stand up to Wall Street special interests before, during, and after the crisis.

This absurd condescending comment has no place in a serious newspaper.

It isn't in a serious newspaper. Or more precisely, it isn't on a serious editorial page. Any page sporting the likes of Hiatt, Krauthammer, Will, etc. can't even pretend to be serious.

My apologies. In my haste, I omitted the biggest and worst joke of all -- Broder.

Andrei,

You are entitled to your hatred of Obama and Democrats. But you are not entitled to asess economic history as if it began in January of this year. Please let us know the extent to which you think the policies of those wonderful role models Bush, Greenspan, and the recent Republican-controlled Congresses contributed to our present sustained
unemployment.

AbqMike

Watch this 1st
http://video.google.com/videoplay?docid=-515319560256183936#
The Fannie Mae Dice Roll Continues
Losses of $400 billion are increasingly possible.
"I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing."
—Representative Barney Frank, September 25, 2003
It was six years ago that Mr. Frank announced his famous dice roll on Fannie Mae and Freddie Mac in the name of affordable housing. Mr. Frank got his wish, and the losses keep rolling in, with no end in sight as Washington finds new ways for the companies to serve political purposes.
Last week, Fannie Mae posted a quarterly loss of $19.8 billion—which believe it or not was an improvement on the $29.4 billion that it lost a year earlier. Last quarter's results came with yet another request for government aid—$15 billion worth. That brings the total tab for Fannie and Freddie to $111 billion since they were put into conservatorship in September 2008.
It would be bad enough if Fannie and Freddie's continuing losses were merely the product of bad bets made amid the housing bubble in 2006 and 2007. But the latest red ink is in large part the result of a deliberate choice to run their businesses at a loss over the past year to support White House housing policies.
The most recent losses include $22 billion of what Fannie Mae calls "credit-related expenses," which in English means foreclosure costs and losses on loans that are "worth" more than the house. Of that amount, $7.7 billion comes straight from Fannie's support of the Obama Administration's mortgage-modification program. Fannie and Freddie have been buying mortgages out of the securities they were bundled into and are then modifying the terms, which invariably means taking a loss on the loan.
Through this program, taxpayers are directly subsidizing homeowners who borrowed more than they could afford, or more than their house is now worth, or both. The government is doing this under the cover of losses at Fannie and Freddie because Congress and the White House know these programs are both expensive and unpopular with the poor saps still paying their mortgages on time.
The dynamic duo's delinquency rates also continue to climb, even on modified loans and on mortgages on which Fan and Fred have chosen to forbear from demanding repayment. The $400 billion that Congress has appropriated to keep Fan and Fred afloat, in other words, has quietly morphed from emergency aid into a $400 billion housing subsidy program. On current trends this will all be spent before President Obama is up for re-election, and, judging by the results so far, taxpayers will have little to show for it.
Having ruined the U.S. mortgage market, Fan and Fred have become the tools for its continued nationalization and a never-ending bailout of mortgage borrowers. This is one reason we advised former Treasury Secretary Hank Paulson to put the companies into receivership and leave them in run-off mode when he had the chance.
Instead, Mr. Paulson placed them in conservatorship and sent them out to lend more and more. In the past year, they have all but erased the private mortgage market, at great cost to both the taxpayer and the integrity of the private financial system. They will roll snake-eyes for taxpayers for years to come.
Printed in The Wall Street Journal, page A20

AV: Why are you stumping for a group whose stated leader is the single dumbest woman in America? Anti-elitism is the least of your problems.

Sarah Palin is a living insult to all the great women this world has ever seen. She has no idea about any tangible issue. Her only method of whipping up "support" is by invoking fears through unsubstantiated claims. Palin would lose in a moderated debate to any female member of Congress right now - because debates require actual knowledge of actual issues, and we can't have that in the Republican party!

Ben Bernanke didn't take over at the Fed until 2006, at which point the housing bubble was already quite inflated. He may have been slow to respond, but I think if you're looking to blame a Fed chairman for the asset bubble, you need to look at Greenspan more than Bernanke.

Also, I think the assertion that the housing crisis was easy for economists to see coming is a bit revisionist. How much money did Mr. Baker make shorting the mortgage and real estate markets in 2006? We know who guys like John Paulson are precisely because they were pretty rare.

Everything looks obvious in hindsight, but at the time most economists and industry participants missed the "obvious"--which is why we had a bubble in the first place.

Dave, if you follow Dean very closely at all, you know he was pointing out the housing bubble and its potential destructive consequences since 2002. And all it took was some very simple mathematics and common sense to deduce that there was an enormous housing bubble. So, no, it's not revisionist to claim that the housing bubble was easy to see. The problem is that economists are so blinkered by their own ideology that they fail to see things that are obvious to those not indoctrinated with the notion that markets are rational and so forth.

My understanding of the credit bubble is that, in 2003, FNMA and Freddie WERE in reasonably good shape. Loans tailored for the MBS issues were the good loans. All the garbage that started coming around in 2003-2005 was dumped into private label CMOs,and then CDOs.

It wasn't until later, in the 2005-2006 timeframe, that increasing number of ALT-A instruments were brought into Freddie, and it wasn't until late 2006 into 2007 when the major banks knew that were creating really crappy paper, that they then force-fed this to th GSPs to get them off their hands. This was aided by GOP operatives.

Loans by banks covered under the housing rules were only 11% of sub-prime mortages.

There is plenty of blame for a lot of people, but it was the GOP that was in charge when this mess was allowed to go on...

While the operative fault lies most certainly with the Greenspan Fed (as they are the agency actually charged with maintaining a stable economy, unlike the congress, Freddie and Fannie and others...), the real fault lies in an ideology that led otherwise decent and rational people to become indecent and irrational people,/b>.

The entire neo-liberal theology is at the heart of the problem, the cultural values written about by Ayn Rand, popularized by Ronald Reagan, and so clearly portrayed by Gorden Gecko.

We, to the degree that we individually bought into the entire free-market Gorden Gecko fantasy, are all proportionally guilty, and until the myths of these values are rooted out... the 'government is the problem, not the solution' myth, the 'less regulation creates greater prosperity' myth, the 'free trade creates rising living standards for all' myth, the 'low taxes creates prosperity' myth... and most of all, the myth of the 'efficient market hypothesis'... until we are able to collectively throw these concepts into the ash heap of false economic theories... we'll continue to suffer from their effects.

While the Fed was the facilitator in chief, the culture itself was the cause.

Dave, if you follow Dean very closely at all, you know he was pointing out the housing bubble and its potential destructive consequences since 2002.

I don't follow Mr. Baker very closely at all, which is why I asked the question. But if he was talking about a housing bubble in 2002, housing prices continued to rise for 4 years after he wrote that paper; in fact, they are back at 2003 levels and rising again. So it's still not clear there was a housing bubble in 2002. And if the Fed had tried to rein in real estate prices from 2002 levels, it's not clear that would have been a good thing at all. This is a good example of why it's difficult for the Fed to try to regulate asset bubbles.

Of course, maybe Mr. Baker was right and there will be additional housing price declines....wouldn't surprise me.