A case of irrational calm?

Not everyone can be as prescient as Alan Greenspan, especially Ben Bernanke. His effort to predict the consequences of the sub-prime mess have been less than stellar. The Financial Times reports that Merrill Lynch economist David Rosenberg selected a series of quotes from Ben Bernanke this year that might already haunt him.

Some choice quotes, according to the Times and Rosenberg:

"Some tentative signs of stabilization have recently appeared in the housing market." -Feb. 14
"The impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained."
-March 28
"We believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spill-over ... to the rest of the economy or to the financial system" -May 17
"Fundamental factors - including solid growth in incomes and relatively low mortgage rates - should ultimately support the demand for housing, and at this point the troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system."
-June 5

Even now, the paper notes, as investors grimly await hundreds of billions of dollars of losses on sub-prime debt and warnings of a recession mount, the Fed still proclaims optimism and warns against expecting rate cuts.

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