Janet Yellen for Fed Chair!January 18, 2013: 5:28 PM ET
If Ben Bernanke doesn't stay for another term, please nominate this woman for first chairwoman of the Federal Reserve.
One thing was blatantly clear when the Fed released its 2007 transcripts Friday: The central bankers didn't see the financial crisis coming until it hit them on the head.
But among them, the quickest to stress the severity of the housing downturn was Janet Yellen. Then president of the Federal Reserve Bank of San Francisco, Yellen started sounding the alarm bells in May 2007.
"Much of the first-quarter weakness, of course, was due to housing, and I really don't see that sector starting to turn around at this point," she said.
A month later, she again cautioned about the housing market.
"In terms of risks to the outlook for growth, I still feel the presence of a 600-pound gorilla in the room, and that is the housing sector. The risk for further significant deterioration in the housing market, with house prices falling and mortgage delinquencies rising further, causes me appreciable angst."
In August, she felt "appreciable angst" again:
"The housing sector obviously remains a serious concern. We seem to be repeatedly surprised with the depth and duration of the deterioration in these markets; and the financial fallout from developments in the subprime markets, which I now perceive to be spreading beyond that sector, is a source of appreciable angst."
Later in the month, she added this:
"We've developed a credit crunch. If liquidity isn't quickly restored in these markets, we are looking at a credit crunch—signs of it are everywhere.... Every day we hear about companies that are trying to finance prime quality jumbo mortgages and cannot get the financing to do that and are tightening standards."
Then in September:
"A big worry is that a significant drop in house prices might occur in the context of job losses, and this could lead to a vicious spiral of foreclosures, further weakness in housing markets, and further reductions in consumer spending... At this point I am concerned that the potential effects of the developing credit crunch could be substantial."
And in December, the month that was later defined as the beginning of the Great Recession:
"The possibilities of a credit crunch developing and of the economy slipping into a recession seem all too real."
Was Yellen better tuned into the housing downturn, merely because of her region? (The San Francisco district includes hard hit states like California, Nevada and Arizona). Or is she just a better forecaster?
Either way, she deserves some credit for voicing her concerns about the housing market so loud and clear.