1. EMBARRASSING

    Fed Didn’t Expect Housing Bust in '06

    Washington, UNITED STATES:  This 26 March, 2006 photo shows the US Federal Reserve in Washington, DC. The Federal Reserve is expected to stage the 15th successive hike to US interest rates this week when it holds its first meeting under new chairman Ben Bernanke. But after a spate of patchy numbers, the outlook for monetary policy in the world's biggest economy has grown much murkier beyond the US central bank's two-day meeting ending 28 March. Under its illustrious former chief, Alan Greenspan, the central bank raised its benchmark Fed funds rate 14 times running from lows plumbed in a mid-2001 recession. The rate now stands at 4.50 percent. It is universally expected by economists to go up another quarter-point to 4.75 percent when the Fed's open market committee (FOMC) announces its decision 28 March. Fed officials from Bernanke down have underlined that US economic growth has been proceeding at a robust tick, which would justify another hike at a time when price pressures from high energy costs are still feeding through.  AFP PHOTO/Karen BLEIER  (Photo credit should read KAREN BLEIER/AFP/Getty Images)

    Karen Bleier / Getty Images

    At least they won’t make that mistake again. Thursday, The Federal Reserve released transcripts of 2006 meetings, revealing that the officials had little idea that the housing bust would shake the entire U.S. economy. The transcripts show frank meetings, held every six weeks to assess the economy, where officials laughing about some of the promotions home builders were using to attract buyers (like giving away cars).  Timothy Geithner—then the president of the Federal Reserve Bank of New York—says that the expansion going forward looks good. Others say a drop in housing sales may actually funnel money to other areas of the economy. The transcripts are held for five years before being released. While the recordings show a general lack of understanding of how the economy worked—and perhaps an overdependence on broken models—there is some good news: current Fed chairman Ben Bernanke is one person who continuously warns that troubles with the housing market could have grave consequences.

    Read it at New York Times