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Bernanke Says Fed Failed to See Broader Risks From Housing

Federal Reserve policy makers failed to foresee a threat to the financial system from the housing market in 2005 in part because central bank economists didn’t find major risks, Chairman Ben S. Bernanke said.

At one Federal Open Market Committee meeting in mid-2005, Fed governors and regional presidents heard staff briefings suggesting that the U.S. mortgage system “might bend but would likely not break” from a large home-price drop, and that the market may rest on “solid fundamentals,” Bernanke said in a Dec. 21, 2010, letter to the Financial Crisis Inquiry Commission, providing his views and revealing new details on FOMC meetings from 2005 to 2008.