Posted on 09/30/2013 11:52:41 AM PDT by Kaslin
With Larry Summers withdrawing from the race for Federal Reserve chair, current Fed vice chair Janet Yellen has pulled into the lead to become Ben Bernanke’s replacement. Previous to her current appointment, Yellen served as president of the San Francisco Federal Reserve Bank The SF Fed’s district includes three of the worst states in the housing crisis – California, Arizona and Nevada. I think its fair to say that without the housing boom and bust in these states we wouldn’t have had a mortgage crisis. Given that Yellen was the top banking regulator for this geography, one has to wonder whether she was asleep at the wheel.
This issue wasn’t ignored at her confirmation hearing for Fed vice chair. Here’s a little of her exchange with Sen. Richard Shelby (R-Ala.):
SHELBY: And regarding your tenure as president of the 12th District, I have two questions. First, what role do you believe a breakdown in regulatory oversight played in the failure of the institutions in your district? And secondly, were you raising any warning flags with respect to speculative excesses or lax monetary policy during that period?
YELLEN: So the first question was to the breakdown – to the breakdown in…
SHELBY: Do you believe a breakdown in regulatory oversight – what role do you believe that a breakdown in regulatory oversight played in the failure of the institutions in your district?
YELLEN: Working with other regulators, I think that our regulatory oversight was careful and appropriate, but I believe that the…
SHELBY: Well, excuse me. You say it’s careful and appropriate, and you – most people believe…
YELLEN: Given the…
SHELBY: … it was lax and inappropriate.
YELLEN: Well, I – in the institutions that have failed in my district are mainly community banks with high exposure to commercial real estate.
SHELBY: OK.
YELLEN: And when I say careful and appropriate, I mean that as early as 2001…
SHELBY: OK.
YELLEN: … people in the Federal Reserve System, and particularly in my bank, were at the forefront of focusing on high concentrations that existed in the banks we supervised in commercial real estate. We saw that these exposures and concentrations could be a source of vulnerability, and we monitored this carefully throughout.
Interestingly enough she never touches on the topic of monetary policy and its impact on housing prices. When the Fed hasn’t been complicit in generating bubbles, they’ve generally just turned a blind eye to them. If one cannot from the perch of San Francisco identify the perverse impact of loose money on housing prices, then you’re likely to miss it from D.C. as well.
If you think bubbles are a great avenue for wealth creation, then Yellen is the Fed chair for you. If you, however, suspect bubbles are damaging to our economy, then you might rightly be concerned that she repeats her San Francisco performance on a national level.
They haven’t been able to see any of our previous bubbles. Why would anyone think they will see the next one.
Bubble Dance
ummm... all she would have to do is look in a mirror...
What makes you think that? They work for the big banks. They blew them on purpose. They watched the banks create derivatives. They are now "improving the balance sheets of the banks by "buying" 30 to 40 billion of their crap every month. Theft on a global level.
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Can't find my reference that says there are 57 Arab states. I think it was a slip of the tongue.
I'll keep looking; I need a refresher and clarification. Maybe a hoax, but I don't think so.
hummingbird
She probably does not know what a bubble looks like. Tell her it looks like Hitlery’s back side and that eventually something will burst it.
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