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Strategies & Market Trends : The Residential Real Estate Crash Index
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From: Live2Sail8/4/2008 3:30:37 PM
Read Replies (3) of 306849
 
I had a chance to talk to my friend who works as an economist at the Federal Reserve. My friend does briefings for the Fed Governors for when the board meets.

Let me first say that I like my friend quite a bit.

I unloaded my vitriol on my friend about the Fed, congress, SEC, etc. My friend really toed the the party line. My friend said the following things (and I paraphrase a bit):
it's really hard to know when you're in a bubble;
the Fed recognized froth in some markets;
the Fed was truly worried about the Japan situation of saving rate-cut powder until later, so blasted rates down to 1%;
admitted to holding rates too low for too long in retrospect; agreed to take blame for causing part of the bubble;
pessimistic about the economy (my friend is pretty optimistic, generally);
mentioned a lack of practical banking experience on the board (did not know about fraudulent lending, appraisals, etc).

I was taken aback by the lack of practical experience these economists have. I always thought that the Fed board had enough data coming in that they knew what was going on. It sounds like bankers were hiding it from the Fed. I told my friend that I mentioned of low rates being a problem in 03, and how we've been discussing these issues here on this board. It was a frightening discussion.
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