This is a question that members of Congress should be asking right now. It is becoming increasing clear that we are facing the worst financial meltdown since the Depression, and Mr. Bernanke was caught asleep at the wheel.
In testimonies before Congress and other statements he repeatedly assured the public that there was no bubble in the housing market, arguing that fundamental factors explained the unprecedented 70 percent increase in inflation-adjusted house prices from 1996 to 2006. Such reassurances undoubtedly helped sustain the bubble until it finally reached the bursting point last year.
Even after the bubble began to burst, Mr. Bernanke failed to recognize the seriousness of the problem. As recently as last July, he told Congress that, "for the most part, financial markets have remained supportive of economic growth," failing to see the financial tsunami that was about to engulf the economy and push it into a recession. As the successive waves have hit the economy, Bernanke has been consistently behind the curve. Even at this date, he still has not acknowledged the likely damage to financial markets and the economy from the loss of as much as $8 trillion in housing bubble wealth.
In fairness to Bernanke, most of the blame for the housing bubble rests on the shoulders of his predecessor, Alan Greenspan. However, Mr. Greenspan has fled the scene of the crime. (Actually he is still there, busily trying to rationalize his failures, but Greenspan is no longer accountable to Congress.)
RLCC: Both Bernanke and Greenspan knew full well that there was a bubble. They made it last as long as possible while all the ultra-rich insiders positioned themselves perfectly.
by admin from on February 20, 2008, 9:22am