Let's get the cliche out of the way right away: Hindsight is 20/20.


The Fed has released the transcripts of its Open Market Committee meetings from 2006.

I haven't read them all, but I've parachuted into enough of them to be dumbstruck by how certain Ben Bernanke and crew were that the housing slowdown would be manageable and not have much of an impact on the economy. This placidity came despite warnings from the CEOs of major homebuilders that order cancellations were piling up at a previously unseen pace.

Here's one quote, in August 2006, that captures the general feeling. It came from Susan Bies, a Federal Reserve Board Governor who resigned in 2008:

She was not alone in that sentiment.