Bernanke and California

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Binyamin Appelbaum and David Cho have a nice story in the Washington Post today about the Fed’s lackadaisical regulation of banks in the decade before the housing bust.  It’s worth a read.  As a native Southern Californian, though, this passage jumped out at me:

In January 2005, National City’s chief economist had delivered a prescient warning to the Fed’s board of governors: An increasingly overvalued housing market posed a threat to the broader economy, not to mention his own bank and others deeply involved in writing mortgages.

The message wasn’t well received. One board member expressed particular skepticism — Ben Bernanke.

“Where do you think it will be the worst?” Bernanke asked, according to people who attended the meeting, one in a series of sessions the Fed holds with economists.

“I would have to say California,” said the economist, Richard Dekaser.

“They have been saying that about California since I bought my first house in 1979,” Bernanke replied.

I suppose that’s true.  But here’s the thing: “they” were right.  California went through a housing bubble in the 1980s that burst in 1990.  I should know: I bought a house in 1989 and lost $40,000 on it before finally caving in and selling it four years later.  In all, it took nearly a decade for housing to regain its pre-bubble value — at which point, a brand new bubble was heating up.

It was myopic enough to believe in 2005 that housing wasn’t overpriced on a nationwide basis.  But to specifically dismiss concerns about California even though it had been in the trough of a housing crash a mere 10 years earlier? That’s just willful blindness.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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