Bernanke, mildly paraphrased: "
a very long period of very low interest rates didn't cause housing prices to skyrockets, it was those damn jew bankers and their tricky ways""
Quote:
Increasing interest rates wouldn’t have prevented the downturn, Bernanke argued before the meeting of the nonprofit academic group.
“Monetary policy is also a blunt tool, and interest rate increases in 2003 or 2004 sufficient to constrain the [housing] bubble could have seriously weakened the economy at just the time when the recovery from the previous recession was becoming established,” he said.
He said linkages between the sharp rise in housing prices and monetary policy is “weak.” .... “House prices began to rise in the late 1990s, and although the most rapid price increases occurred when short-term interest rates were at their lowest levels, the magnitude of house price gains seems too large to be readily explainable by the stance of monetary policy alone.”
Instead he blamed the increased use of “exotic types of mortgages and the associated decline of underwriting standards,” which could have been curtailed with stronger government regulation. “The lesson I take from this experience is not that financial regulation and supervision are ineffective for controlling emerging risks, but that their execution must be better and smarter,” he said.
|
Economic Law -- lower interest rates yield higher asset prices (all other things being equal)
Bureaucratic law -- when a government bureaucracy fucks up, the bureaucracy invariably claims it needs more power to prevent the problem from recurring.
Bernanke's explanation that the housing bubble was caused not by lower interest rates but instead by a lack of sufficient regulatory oversight says more about his bureaucratic instincts than his economic reasoning.