Fed transcripts from 2007 show divided board

The seal of the Federal Reserve, photographed in December 2012.

We got a glimpse into a pivotal year for the U.S. economy on Friday when the Federal Reserve released transcripts from its 2007 meeting. It is a chronicle of a year that started with relative optimism and ended with the Fed beginning to try to save the economy. 

We now know that the Great Recession began in December of 2007, but the Fed transcripts from that month show disagreement among officials over how bad things were.  

“It’s a rather startling divide, which I think I think is kind of hard to explain given that they’re all looking at the same data,” says Justin Wolfers, Professor of Public Policy and Economics at the University of Michigan.

Some at the table proved prescient. Tim Geithner, then head of the New York Fed, was among those worried about impending recession. But Dallas Fed president Richard Fisher spent a lot of time talking about food price inflation. 

“There wasn’t much food price inflation. There hasn’t been much food price inflation,” Wolfers says.  

That disagreement might be why some think the Fed was slow to respond to the unfolding crisis.  

“Policymakers are almost always late,” says Alan Sinai, chief global economist at Decision Economics. 

Even as they outlined the rapid deterioration of the housing and mortgage markets, some felt the financial system could handle the stress. But now we know how much worse things got in 2008. We’ll get those transcripts next year. 

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