New paper from Federal Reserve Bank of Boston outlines some of the facts of the mortgage crisis.


This paper presents 12 facts about the mortgage market. The authors argue that the facts refute the popular story that the crisis resulted from financial industry insiders deceiving uninformed mortgage borrowers and investors. Instead, they argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. The authors then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago. Economists should acknowledge the limits of our understanding of asset price bubbles and design policies accordingly.


In a battle for monetary policy supremacy.

Money quote:

That said, the Fed’s actions in the recovery suggest that it has probably mitigated the worst of the recession’s effects. Indeed, the Federal Reserve made dramatic moves (blue) to maintain credit standards (green):”

Read more:

Cooling on your internet window sill.


Many are probably now aware of the notion that the Federal Reserve needs to be ‘audited’. Like this has never been remotely thought of.

Except, oops, it has.

Money quote:

The Fed is extensively audited, as required by federal law.

More than 425,000 hours each year are devoted to the following:

  • Each Reserve bank has internal auditors who report to the bank’s board of directors. This is similar to the auditing structure used by large corporations in the United States.
  • Board of Governors staff examines activities of the Reserve banks. The Board has oversight authority for the entire Federal Reserve System.
  • Financial statements of the regional Reserve banks and the Board of Governors must be audited every year by an external auditor

The Treasury secretary told congress that this is not the time to pinch pennies.

Money quote:

“They were indispensable in stabilizing the global economy during the recent financial crisis” and “provide unparalleled returns” on US contributions,”

Regional Fed Reserve board members, meaning the Fed Banks that arent Richmond, San Franciso and New York, are growingly concerned by what I think could be best termed the clique factor.

Dallas Fed exec Richard Fisher is calling for a nuclear option to unwind unwieldy and overwroght banks termed “too big to fail”.

Money quote:

Unfortunately for our banking regulation system, critics in the regional Federal Reserve banks haven’t had much influence on regulatory policy.

One reason is that the regional Fed officials seem to be talking their own book, or can be dismissed as doing so. Outside of New York, San Francisco and Richmond, Va., the regional Feds oversee only the small and midsize banks that compete with the “too big to fail” banks. The small guys suffer when the big banks are unfairly subsidized by the government, so the regional Feds can be brushed off as merely cheerleading for their team.

This interactive graph from the Minneapolis Fed Reserve shows the different recessionary periods since 1945 and how quickly the recovery was.

Granted, this most recent recession was even worse that the 1948 drop, but I like seeing that the heavily labored trend back toward the sun is really happening.

In any case, its a super fun tool that I would recommend looking at!