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Article Artículo

Bernanke, Geithner, and Paulson Still Don't Have a Clue About the Housing Bubble

NYT readers were no doubt disturbed to see a column in which former Fed Reserve Board chair Ben Bernanke, Obama Treasury Secretary Timothy Geithner, and Bush Treasury Secretary Henry Paulson patted themselves on the back for their performance in the financial crisis. First, as they acknowledge in the piece, all three completely failed to see the crisis coming.

During the years when house prices were getting way out of line with both their long-term trend and rents, Bernanke was a Fed governor, then head of the Council of Economic Advisers, and then Fed chair. He openly dismissed the idea that the run-up in house prices could pose any threat to the economy. Henry Paulson was at Goldman Sachs until he became Treasury Secretary in the middle of 2006. As the bank's CEO, he was personally profiting from the bubble as the bank played a central role in securitizing mortgage-backed securities. Timothy Geithner was president of the New York Fed, where he was paid over $400,000 a year to make sure that the Wall Street banks were not taking on excessive risk.

It is bad enough that these three didn't see the crisis coming, but they still seem utterly clueless. They tell readers:

"Productivity growth was slowing, wages were stagnating, and the share of Americans who were working was shrinking. That put pressure on family incomes even as inequality rose and upward social mobility declined. The desire to maintain relative living standards no doubt contributed to a surge in household borrowing before the crisis."

Actually, productivity growth didn't begin to slow until 2006, as the bubble was hitting its peak. Growth was quite strong from 2000 to 2005, which means the cause of wage stagnation in those years must lie elsewhere. (If they had access to government trade data they might think the explosion of the trade deficit to 6.0 percent of GDP played a role.) The surge in borrowing clearly preceded the productivity slowdown as could be seen from the plunge in savings rates or reading the papers celebrating people pulling equity out of their homes by some guy named Alan Greenspan.

CEPR / September 07, 2018

Article Artículo

United States

Workers

Labor Market Policy Research Reports, September 7, 2018

CEPR compiles recent research to illustrate the state of labor in the United States.

UC Berkeley Labor Center

Driverless? Autonomous Trucks and the Future of the American Trucker

With the rising prevalence of autonomous driving vehicles, Steve Vescelli breaks down how this new technology could affect the trucking industry, and poses policy considerations.

 

Institute for Research on Labor and Employment

The New Wave of Local Minimum Wage Policies: Evidence from Six Cities

Sylvia Allegretto, Anna Godoey, Carl Nadler and Michael Reich examine how increases in minimum wages have affected employment outcomes in Chicago, DC, Oakland, San Francisco, San Jose and Seattle.

CEPR and Matt Harmon / September 07, 2018