The recent release of the 2006 transcripts of the Federal Reserve's main policymaking body stimulated a small media frenzy: "Little Alarm Shown at Fed at Dawn of Housing Bust," headlined The Wall Street Journal. The Washington Post agreed: "As financial crisis brewed, Fed appeared unconcerned." The New York Times echoed: "Inside the Fed in '06: Coming Crisis, and Banter."
Comments from members of the Federal Open Market Committee (FOMC) now seem misguided. The first 2006 meeting was the last for retiring Fed Chairman Alan Greenspan. Janet Yellen — then president of the Federal Reserve Bank of San Francisco and now Fed vice chair — said "the situation you're handing off to your successor is a lot like a tennis racket with a gigantic sweet spot."
Treasury Secretary Timothy Geithner — then head of the Federal Reserve Bank of New York — called Greenspan "terrific" and suggested his already exalted reputation might grow even more. There was no sense of a gathering crisis.