Excerpt from a 2007 NYT article demonstrating the historical incompetence of those in charge of our mortgage and banking industries.  I note that Bernanke is still in charge of the Federal Reserve despite having demonstrated no understanding of the Housing Bubble while it was expanding, nor of the inevitable economic impact of its deflation over the past three years.

A 2004 report jointly written by the top economists at five organizations -- the industry groups for real estate agents, home builders and community bankers, as well as Fannie Mae and Freddie Mac, the large government-sponsored backers of home mortgages -- was typical. It said that ''there is little possibility of a widespread national decline since there is no national housing market.''

Top government officials were more circumspect but still doubted that the prices would decline nationally. Alan Greenspan, the former Fed chairman, said the housing market was not susceptible to bubbles, in part because every local market is different.

In 2005, Ben S. Bernanke, then an adviser to President Bush and now the Fed chairman, said ''strong fundamentals'' were the main force behind the rise in prices. ''We've never had a decline in housing prices on a nationwide basis,'' he added.