As top Federal Reserve officials debated whether there was a housing bubble and what to do about it, then-Chairman Alan Greenspan argued that the dissent should be kept secret so that the Fed wouldn't lose
control of the debate to people less well-informed than themselves.

"We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully
understand," Greenspan said, according to the transcripts of a March
2004 meeting.

At the same meeting, a Federal Reserve bank president from Atlanta, Jack Guynn, warned that "a number of folks are expressing growing concern about potential overbuilding and worrisome speculation in the
real estate markets, especially in Florida. Entire condo projects and
upscale residential lots are being pre-sold before any construction,
with buyers freely admitting that they have no intention of occupying
the units or building on the land but rather are counting on 'flipping'
the properties--selling them quickly at higher prices."

Had Guynn's warning been heeded and the housing market cooled, the financial collapse of 2008 could have been avoided. But his comment was kept secret until Friday, when the central bank released the transcripts of Federal Open Market Committee meetings for 2004 and CalculatedRisk spotted it. The transcripts for 2005 to the present are still secret.

"The substantial run-up in house prices, which we have followed in Florida and also see in the populous Northeast and West Coast of the United States, may be at least partially attributable to unusually low
mortgage rates influenced by our very accommodative policy," Guynn
warned.

But when the Fed released contemporaneous minutes of the meeting, the bank downplayed Guynn's concerns.

"Reports from some contacts suggested that speculative forces might be boosting housing demand in some parts of the country, with concomitant effects on prices, suggesting the possibility that house
prices might be moving into the high end of the range that could be
consistent with fundamentals," reads the minutes, which were released
to the public several weeks after the meeting.

Note the qualifiers "might be," "suggesting the possibility," "might be," "could be." In the real world that Guynn described there is nothing whatsoever "consistent with fundamentals" that could explain
"buyers freely admitting that they have no intention of occupying the
units or building on the land but rather are counting on 'flipping' the
properties."

The release of the transcripts comes at a bad time politically for the Federal Reserve, as it works to prevent Congress from authorizing the Government Accountability Office to audit the central bank.

The audit language has already passed the House, despite White House and Fed opposition, and a Senate amendment by Bernie Sanders (I-Vt.) is gaining momentum, cosponsored as of Monday morning by ten Republicans and five Democrats.

But the Fed also benefits from the timing. "Transcripts of meetings for an entire year are released to the public with a five-year lag," according the Fed's own policy. Had the transcripts been released on
time, they could have influenced the confirmation of Ben Bernanke for a
second term as chairman. Meanwhile, the Fed policy of releasing a full
year at once deprives the public of transcripts from the first four
months of 2005, which are now five years old. A Fed spokeswoman tells
HuffPost those transcripts will be available at roughly this time next
year.

At the same March meeting, Bernanke said that he had reviewed the transparency policies of foreign central banks and found that other banks were more forthcoming. "It seems to me that we might want to
consider the possibility of providing the public with some type of
regular financial stability report, perhaps as part of the Monetary
Policy Report to the Congress or in some other existing venue or
perhaps as a stand-alone document," Bernanke suggested. More than five
years later, with Bernanke now chairman, that report has yet to be made
public, though the Fed did create an inter-divisional internal working
group on financial stability.

Other than the passing mention of speculation, the March minutes imply that the meeting participants had a rosy outlook on the housing bubble. "Activity in the housing market moderated in January and
February from its elevated pace in the fourth quarter. Single-family
housing starts and permits stepped down, although both measures
remained above their average levels of the first three quarters of
2003," the minutes read. "Overall, expenditures were supported by
sizable gains in real disposable personal income and increases in
household wealth owing to rising home and equity prices. ... Committee
members noted that activity in the housing sector, while still quite
elevated, had fallen back from its extraordinary pace of late last
year."

But there were indications from others that housing prices were getting out of hand. "A second concern is that policy accommodation -- and the expectation that it will persist -- is distorting asset prices.
Most of this distortion is deliberate and a desirable effect of the
stance of policy," said Federal Reserve Board Vice Chairman Don Kohn,
meaning that low interest rates were artificially propping up housing
prices. "But as members of the Committee have been pointing out, it's
hard to escape the suspicion that at least around the margin some
prices and price relationships have gone beyond an economically
justified response to easy policy. House prices fall into this
category."

The suspicion that Kohn says is hard to escape doesn't appear in the minutes; rather, it only appears in the transcripts that were released on Friday. While the House debated a measure to authorize an audit of
the Fed, Kohn personally lobbied against it. He has since announced his
resignation.

The president of the Federal Reserve Bank of Boston, Cathy Minehan, also voiced concerns. "New England's rate of inflation, as measured by the Boston CPI, is rising much faster than the nation's, largely
because of a 6.3 percent increase in shelter costs versus a year ago.
The high price of housing worries many in the region who find that
hiring the skilled workers they need in health care, for example, is
made even more difficult by high housing costs," she said. While
conceding that raising interest rates could come with its own risks,
she argued: "I think the costs to us in terms of credibility would be
greater if the situation got out of hand on the upside."

Even Tim Geithner, then a vice chairman of the Fed, raised concerns. "[T]he issue has been raised by Vice Chairman Geithner and others that our current policy stance may contribute to potential financial
imbalances down the road," then-Vice Chairman Ben Bernanke said,
according to the transcript, before dismissing such concerns.
("Imbalance," of course, is a gentle term to describe what the housing
crash ultimately wrought.)

Three months later, participants at the June meeting were still concerned. Stephen Oliner, the Fed's associate research director, showed the committee a chart of the growing disparity between home and
rent prices, the most obvious indication of a housing bubble. Roger
Ferguson, a Fed vice chairman, asked about a footnote in the chart that
said the graph had been adjusted to reflect biases in the trends, according to the transcript. Oliner described the adjustments as "technical."

"Had we not adjusted for them, the rent-to-price ratio would have been much lower at the end point. So it would have looked more alarming," he said. Oliner also flipped the housing line upside down so
that it's not shooting off into the sky and is instead descending. "I
don't want to leave the impression that we think there's a huge housing
bubble. We believe a lot of the rise in house prices is rooted in
fundamentals. But even after you account for the fundamentals, there's
a part of the increase that is hard to explain," said Oliner.

Jeff Lacker, president of the Richmond Federal Reserve Bank, was also curious about the chart. "Just to follow up on what Roger was asking about the panel in chart three on housing valuations. In that
panel the relative movement of the two measures is somewhat key to at
least the intuitive persuasiveness of the argument that housing might
be overvalued," said Lacker. A laugh was then had by Greenspan and the
other committee members about the confusing chart.

"You can't trust them to do it right!" Greenspan cracked, according to the transcript. No reference to the chart appears in the June minutes.

Instead, the minutes reflect Greenspan and Bernanke's position that the rise in housing prices was nothing to worry about. Here's what the Fed's minutes told the public: "In housing markets, activity had
remained at generally high levels, with only a few signs that rising
mortgage rates were beginning to hold down sales and construction.
There was evidence in some areas that inventories of unsold homes had
risen. Members noted that persisting overall strength in housing might
to some extent be a response to expectations of further increases in
mortgage rates, implying that a slowdown might be likely later in the
year."