BUSTED: Unsealed Docs Show The Fed Was Fully Warned Of A Housing Crisis


Photo: FOMC

New minutes released today show Fed members were fully aware of the growing housing bubble in the U.S. in June of 2005.The materials include several presentations made on the subject of the emerging housing bubble in the U.S. economy. They have titles like “Is Housing Overvalued?” by Joshua Gallin and “Monetary Policy Implications of a House Price Bubble” by John C. Williams of the San Francisco Fed.

In October of 2005, future Federal Reserve Chairman Ben Bernanke told Congress he didn’t think we were in a housing bubble. Bernanke was not at the June 2005 meeting, having recently become Chairman of President George W. Bush’s Council of Economic Advisers.

Huge aberrant price spikes were clearly forming

Price to rent ratios were clearly out of wack.

Miami showed clear signs of being in a bubble.

The Fed then predicted that house prices were going to fall...dramatically.

In 2005, the FOMC knew that homes could be overvalued by as much as 20%.

Members discussed whether or not they should prick the bubble.

Unemployment scenario for a 20% house price decline.

What they thought could go wrong.

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