Caroline Baum had some interesting comments about Bernanke’s testimony before Congress in her writeup What Bernanke Didn’t Say About Housing.
One of the more interesting exchanges at Ben Bernanke’s testimony to the Financial Services Committee today was the one between the Federal Reserve chairman and Representative Scott Garrett, a Republican from New Jersey.
Citing Bernanke’s assertion that one of the benefits of QE had been the rise in home prices, Garrett said the following: “Previously you have said that the Fed’s monetary policy actions earlier this decade, 2003 to 2005, did not contribute to the housing bubble in the U.S. So which is it? Is monetary policy by the Fed not a cause of inflationary prices of housing, as you said in the past? Or is it a cause of inflating prices of housing? Can you have it both ways?”
“Yes,” Bernanke said, much to Garrett’s surprise. The increase in home prices now is justified by the low level of mortgage rates, he said. On the other hand, those rates averaged 6 percent in the early part of the last decade and “can’t explain why house prices rose as much as they did.”
What he didn’t say was that the percentage of adjustable- rate mortgages soared to a record 37 percent of total mortgage volume in 2005. From mid-2003 to mid-2006, ARM volume averaged 30 percent. The interest rate on ARMs is priced off the Fed’s overnight rate. It was this type of loan that witnessed the most egregious underwriting abuses and the highest delinquency and foreclosure rates. Garrett 1, Bernanke 0. ….
Bernanke’s ploy (as with every central banker) is to absolve themselves of blame for the problems they inevitably cause. Earlier I noted an exchange between Bernanke and Elizabeth Warren that caught Bernanke off guard (see Elizabeth Warren Grills Bernanke on “Too Big to Fail” Policy).
Baum mentioned another one above, and I have a third below.
Sparks Fly: Bernanke Asked to Cut the “Ton of Fat”
Please consider this interesting video where Representative Sean Duffy, a Republican from Wisconsin, confronts Federal Reserve Chairman Ben Bernanke about cutting the `fat’ in the budget.
Link if video does not play Sparks Fly: Bernanke Asked to Cut the “Ton of Fat”
Mike “Mish” Shedlock