Janet Yellen On The Financial Crisis: "I Didn’t See Any Of That Coming Until It Happened"
Janet Yellen may no longer be the frontrunner for the Fed chairmanship at least according to the online betting market, where Larry Summers has taken a commanding lead over the former San Francisco Fed head, but she is certainly still the darling of the progressive left intelligentsia due to her supposed infatuation with perpetuating Bernanke's cheap deficit funding approach (i.e. making bigger government bigger-est) and her clarity of insight when it comes to perceiving the risks of aggressive Fed policy.
While we do not claim to know what Yellen's daily POMO quota would be, especially if she is faced with the same contracting deficit problems that are plaguing Bernanke now (although with the Egyptian civil war due any minute now, US deficit spending seems posied to surge giving the Fed much needed room to monetize a spike in Treasury issuance), and are the sole reason for the taper, we do know one thing: when it comes to her "foresight", rumors of its clarity and depth are certainly vastly exaggerated.
Ms. Yellen told the Financial Crisis Inquiry Commission in 2010 that she and other San Francisco Fed officials pressed Washington for new guidance, sharing the problems they were seeing. But Ms. Yellen did not raise those concerns publicly, and she said that she had not explored the San Francisco Fed’s ability to act unilaterally, taking the view that it had to do what Washington said.
“For my own part,” Ms. Yellen said, “I did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system, the S.I.V.’s — I didn’t see any of that coming until it happened.” Her startled interviewers noted that almost none of the officials who testified had offered a similar acknowledgment of an almost universal failure.
At least Yellen is honest in admitting her complete lack of vision and failure to not only stop but see what was coming, which is more than we can say about Ben "Subprime is contained" Bernanke.
Of course, this time her vision of the future "will be different."
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