In today’s Washington Post, Binyam Applebaum and David Cho took a long look at the Federal Reserve’s complete failure to take note of the subprime housing bubble. “The Fed’s failure to foresee the crisis or to require adequate safeguards happened in part because it did not understand the risks that banks were taking,” they wrote. “[R]ather than looking for warning signs, the Fed had joined — and at times defined — the mainstream consensus among policymakers that financial innovations had made banking safer.”

Of course, much of the focus — and the blame — falls to current Federal Reserve Chairman Ben Bernanke, and Applebaum and Cho rightly remind readers of Bernanke’s 2007 declaration that “we see no serious broad spillover to banks or thrift institutions from the problems in the subprime market.”

And it’s not like there was a shortage of warnings given directly to the Fed regarding the housing market’s problems. In one of many such instances, National City bank’s chief economist told the Fed in January 2005 that “an increasingly overvalued housing market posed a threat to the broader economy.” But “the message wasn’t well received” :

One board member expressed particular skepticism — Ben Bernanke. “Where do you think it will be the worst?” Bernanke asked, according to people who attended the meeting, one in a series of sessions the Fed holds with economists. “I would have to say California,” said the economist, Richard Dekaser. “They have been saying that about California since I bought my first house in 1979,” Bernanke replied.

As it turns out, nine of the top 10 subprime lenders were based in California, “including all of the top five — Countrywide Financial Corp., Ameriquest Mortgage Co., New Century Financial Corp., First Franklin Corp., and Long Beach Mortgage Co.”

This cuts right to the heart of whether the Fed should continue to retain its responsibilities over consumer protection. After all, there were plenty of people out there — both in and out of the government — who saw what was going on.

In 2001, then Treasury official and current FDIC Chair Sheila Bair tried, without success, to get subprime lenders to adopt a code of best practices and allow outside monitors to verify compliance. In 2002, Freddie Mac stopped purchasing some varieties of subprime loans, in an effort to discourage predatory lending.

In 2004, the Greenlining Institute (from California, incidentally) told the Fed that “unscrupulous” lending practices were spreading. Finally, in 2005, Federal Reserve Board governor Edward Gramlich tried to warned his colleagues “of the decline of lending standards and the dangers that this posed.”

All of which signals that the Fed is an institution biased toward the banks that it regulates and unwilling to take action against those banks, even when the financial safety of consumers is at stake. It was by no means the Fed alone that dropped this ball, but it certainly bears a good portion of the burden, which should be remembered as the Senate heads toward a vote regarding whether or not to confirm Bernanke for a second term.

Cross-posted on The Wonk Room.

The right-wing website World Net Daily (WND) has been the source of a variety of smears, particularly a campaign to question the legitimacy of President Obama’s citizenship. While WND exists at the fringes of the conservative movement, top Republican legislators frequent the WND radio program and the Republican National Committee, among other GOP organizations, fund WND through e-mail list rentals. The website, which files regular articles about the role of Christianity during the holiday season, has a new Christmas-themed poll which asks, “What would you like to give Obama for Christmas?” Readers have responded by voting for: “a court ruling booting his ineligible self from office, “a one-way ticket back to Kenya,” and “an arrest warrant”:

Today, Human Events named former Vice President Dick Cheney the “conservative of the year,” publishing a laudatory essay on Cheney by former UN ambassador John Bolton. “Cheney knows that the personal attacks on him, as offensive as they are, in reality constitute stark evidence that Obama and his supporters are simply unable to match him in the substantive policy debate,” wrote Bolton. But in an accompanying interview with Human Events Editors Tom Winter and Jed Babbin, Cheney demonstrated that he doesn’t want to actually engage in a “substantive policy debate” by claiming that there haven’t been “any results” from President Obama’s stimulus package:

Q: And that’s how you would create more jobs?

CHENEY: I would. But you have to work the spending side in terms of trying to wrap up some of the spending that’s going on out there. When you start talking about another ‘stimulus two’ of hundreds of billions of dollars and we haven’t seen any results to speak of, of stimulus one, we can anticipate that the Bush tax cuts that we put in place in ’03 that are going to expire in the end of next year. That is a real tax increase. That is going to happen without Congress having to do anything. It’s going to automatically kick in when those cuts expire. And that affects capital gains and investment income and those are measures that you would clearly not take if you were seriously interested in growing the economy.

Considering that the claim that the stimulus was a a “failure” is regularly thrown around by the right, it’s not surprising that the “conservative of the year” would repeat it. But the fact is that, as the CBO has reported, the stimulus is having its intended effect — creating or saving 600,000 to 1.6 million jobs. Additionally, the CBO found that “gross domestic product (GDP) was 1.2 percent to 3.2 percent higher, than would have been the case in the absence” of the stimulus.