Earlier this month, the Fed released transcripts of some high-level meetings on the economy, and this NY Times article summarizing the conversations was the source of my frustration.
Among the most notable details:
• The officials “laughed about… efforts to make empty homes look occupied.”
• The officials had enough information but failed to comprehend it all properly in part because of their “deep confidence in economic forecasting models that turned out to be broken.”
• “The nation’s pre-eminent economic minds did not fully understand the basic mechanics of the economy that they were charged with shepherding.”
• Some Fed officials went so far as to argue that “a housing slowdown would be good for the broader economy.”
• Fed officials “did not understand how deeply intertwined the housing sector and financial markets had become.”
• Unbridled confidence as evidenced by comments to Chairman Greenspan that the solid economy he was handing to his successor was comparable to “a tennis racquet with a gigantic sweet spot.”
Yes, these details are infuriating enough. But in a new op-ed commentary, Keith Chrostowsky of the Kansas City Star points out yet another infuriating component of the financial crisis: namely, that among that small minority who did protest the faulty premises and blaring overconfidence that made our financial failures possible, three regulators “rang warning bells…at the right time, in the right places, and loud enough for other banking and financial system overseers” but were ignored- and all three were women.
Chrostowsky’s piece hones in on the objections of three high-powered economists: Brooksley Born, Sheila Bair and Susan Bies.
But Bies’ concerns, which came to light in the same transcripts from earlier this month, were particularly of interest. Amidst the light-hearted joking and overconfident braying described by the NY Times, the transcripts show her repeatedly voicing concern about the housing bubble. And the disdain described for the female economists who dared to speak up was palpable. As Chrostowsky describes:
“Born’s role was amply documented in a 2009 PBS Frontline special titled “The Warning.” (It’s still online. Go watch it.)..In one key scene she tells a skeptical questioner at a congressional hearing: ‘We’re trying to protect the money of the American public.’…In another scene, a hearing is coming to an end and you can see Summers, apparently having bested Born, looking dismissively at her.” [Emphasis mine.]
Much has been written about the role of ego, pride, and typically masculine traits in the world of finance, and specifically the areas that most contributed to the financial crisis. I’m not saying sexism caused the financial crisis. But it sure doesn’t seem to have helped things.