By Fall, 2007, it didn't matter what anyone said or did......we were going down.
But Bernanke was still one of those saying things were hunky-dory until almost a year later.
By Fall of 2008, we were deep into a recession which some were saying could lead to a depression. I hardly think Bernanke thought things were hunky-dory.
In fact, Bernanke began lowering interest rates in Fall, 2007 and took other steps during 2008 to contain the crisis:
"Federal Reserve and central banks
The central bank of the USA, the Federal Reserve, in partnership with central banks around the world, has taken several steps to address the crisis. Federal Reserve Chairman Ben Bernanke stated in early 2008: "Broadly, the Federal Reserve's response has followed two tracks: efforts to support market liquidity and functioning and the pursuit of our macroeconomic objectives through monetary policy."[23] The Fed has:
**Lowered the target for the Federal funds rate from 5.25% to 2%, and the discount rate from 5.75% to 2.25%. This took place in six steps occurring between 18 September 2007 and 30 April 2008;[171][172] In December 2008, the Fed further lowered the federal funds rate target to a range of 0-0.25% (25 basis points).[173]
**Undertaken, along with other central banks, open market operations to ensure member banks remain liquid. These are effectively short-term loans to member banks collateralized by government securities. Central banks have also lowered the interest rates (called the discount rate in the USA) they charge member banks for short-term loans;[174]
**Created a variety of lending facilities to enable the Fed to lend directly to banks and non-bank institutions, against specific types of collateral of varying credit quality. These include the Term Auction Facility (TAF) and Term Asset-Backed Securities Loan Facility (TALF).[175]
**In November 2008, the Fed announced a $600 billion program to purchase the MBS of the GSE, to help lower mortgage rates.[176]
**In March 2009, the FOMC decided to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency (GSE) mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities during 2009.[177]
According to Ben Bernanke, expansion of the Fed balance sheet means the Fed is electronically creating money, necessary "...because our economy is very weak and inflation is very low. When the economy begins to recover, that will be the time that we need to unwind those programs, raise interest rates, reduce the money supply, and make sure that we have a recovery that does not involve inflation."[178]"
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