Ben Bernanke [3], chairman of the Federal Reserve [4], gave a speech [5] this week that made headlines and raised eyebrows: “Lax Oversight Caused the Crisis, Bernanke Says.” [6] Finally, many thought, the Fed Chairman would fess up to his role in the crisis! Alas, 98 percent of the speech is dedicated to justifying what the Fed did right over the last decade, and the “lax oversight” apparently had more to do with other agencies charged with regulating mortgages and underwriting practices, not his own.

Bernanke, who is up for Senate confirmation, still has his head in the sand. From former investment banker Naomi Prins [7]:

“For Bernanke to blame weak regulation for the pyramid of bank-concocted, over-leveraged, high fee-producing assets—real loans mixed with a lot of price-inflating hype—is like a Super Bowl coach blaming coaching in general for the failure of his team to win the Lombardi Trophy.”

The Fed is the country’s lead regulator of the financial system. It pooh-poohed economists raising concerns about the $8 trillion housing bubble until the last moment. At this point, with the wreckage of the collapsed bubble all around us and foreclosures still mounting, we need to hear from Bernanke what the Fed did wrong not what it did right. From Dean Baker [8] of the American Prospect: “While all the regulators share some of the blame, the bulk of the blame for bad regulation lies with the lead regulator, the Fed.” Until Bernanke gives that speech, he should not be approved by the Senate.