You may have missed Simon Potter’s publication on Friday “The Failure to Forecast the Great Recession.”

Potter is not merely a distant observer throwing stones; he is the Executive Vice President and Director of Economic Research of the Federal Reserve Bank of New York.

He breaks down the economists’ collective research failure into three categories:

1. Misunderstanding of the housing boom
2. A lack of analysis of the rapid growth of new forms of mortgage finance.
3. Insufficient weight given to the powerful adverse feedback loops between the financial system and the real economy.

The entire piece is in the Think Tank for your reading pleasure . . .

Category: Analysts, Federal Reserve, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

11 Responses to “How The NY Fed Missed the Great Recession”

  1. RE the Real Estate bust:

    They’re way too ‘clever’ (translation: self-interested cognitive dissonance) for their own good.

    When home prices grow way beyond income and rents… something’s gonna break… either home prices have to drop or wages and rents have to suddenly and miraculously rise to meet that level.

    Was the FED predicting some great and sudden rise in wages?

    If so I must have missed it. In fact it seems more likely that they were interested in keeping wages low.

    Seem to me we need new ‘experts’!

    The good news: I’m available and I’ll work for less.

    Frankly the same mentality is responsible for most of our other economic problems… (that somehow we could abandon the production of real goods and become a nation of Real Estate salesmen selling each other houses while the whiz-bangs on Wall Street designed ‘magic paper’ to sell to the rest of the world in exchange for the goods we no longer manufacture ourselves…. Ooops!)

  2. DeDude says:

    At least they are ready to analyze their own failures.

  3. scottycj1 says:

    Barry,

    Looks like the market left the station a day early.

    see previous 2 posts
    best regards

    http://markethighsandlows.wordpress.com/

  4. tyaresun says:

    What!!!! No comment on the timing of the release?????

  5. NoKidding says:

    You miss 100 percent of the shots you do not take?

  6. Chief Tomahawk says:

    With regard to #2, Quicken Loans has created the “Yourgage”: http://www.quickenloans.com/home-loans/custom-mortgage-yourgage

  7. alanjz1 says:

    Judge Rakoff’s ruling rejecting the settlement between the SEC and Citigroup is really worth a read (http://www.nysd.uscourts.gov/cases/show.php?db=special&id=138). His writing is crisp, clear and biting.

    Might we finally see some accountability?

    He concludes thusly:

    An application of judicial power that does not rest on facts is worst than mindless, it is inherently dangerous. The injunctive power of the judiciary is not a free roving remedy to be invoked at the whim of a regulatory agency, even with the the consent of the regulated. If it’s deployment does not rest on facts- cold, hard, solid facts, established by admissions or by trials- it serves no lawful or moral purpose and is simply an engine of oppression.

    Finally, in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing truth. In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for for suppressing or obscuring the truth may always be found. But the S.E.C., of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency’s contrivances.

    Accordingly, the Court refuses to approve the proposed Consent Judgment.

  8. Ted Kavadas says:

    I found ““The Failure to Forecast the Great Recession” be interesting and worthwhile, although I do not agree with various aspects of it.

    For those interested, I wrote a blog post concerning it this morning; it can be found at my blog here:

    http://economicgreenfield.blogspot.com/2011/11/economic-forecast-efficacy-of-recent.html

  9. paper200 says:

    Potter does not recognize folks who have been yelling from the parapet with a bullhorn for at least 2 year before FEDS took off their sunglasses – the guys should be ashamed to even pen an article

  10. victor says:

    Bill Gross missed it too. He made an analysis in Pimco’s “Investment Outlook” at the peak of the bubble of how much the Fed would have to reduce interest rates so that the troubled new owners could refi and make house payments and all would be just fine. He even mentioned the Gov would have had to somehow convince the holders of the mortgages to forgo the prepayment penalties these horrible mortgages came with. He missed completely the Big Picture just like so many other luminaries/entities.

  11. Fred Flintstone says:

    TLDR but in the research do they see this:

    http://research.stlouisfed.org/fred2/graph/?id=HHMSDODNS

    specifically:

    http://research.stlouisfed.org/fred2/graph/?g=3zQ

    showing mortgage debt take-on approaching 20% of total salaries?

    Because if you don’t see that, you don’t see how the bubble supported itself.