The Federal Reserve is the main macroeconomic policymaking unit in the country.
But, their meetings are kept secret for 5 years — because releasing the minutes is thought to be able to give a financial edge to some.
Anyway, the minutes of the FOMC meetings from 2007 were just released. This is interesting because this is when the housing crisis started, which led to the financial crisis, which may have caused, or at least occurred at the same time as the wider recession.
The big winner is Janet Yellen. She’s a macroeconomist from Berkeley, and has worked in the Clinton White House, has been a Federal Reserve Governor, and is now President of the Federal Reserve Bank of San Francisco. She’s the short list to follow Bernanke if he is not asked by Obama to serve a third term.
"I still feel the presence of a 600-pound gorilla in the room, and that is the housing sector," she said in June 2007. "The risk for further significant deterioration in the housing market, with house prices falling and mortgage delinquencies rising further, causes me appreciable angst."
By December, she was pushing the Fed to respond aggressively. She noted that the financial system's problems were happening in the "shadow banking system"—that is, not in traditional banks but rather in bond markets and derivatives markets where hedge funds, investment banks and others traded mortgages and other financial instruments. "This sector is all but shut for new business," she warned.
Keep in mind that macroeconomics is sufficiently hard to forecast that the fact she did well 6 years ago isn’t a guarantee that she’ll do well in the future.
Read the whole thing, entitled “Records Show Fed Wavering in 2007 ” in the January 19 issue of The Wall Street Journal.
Cross-posted from SUU Macroblog, which is required reading for my macroeconomics classes.