Last week, 1,865 pages of Federal Open Market Committee transcripts from 2008 were released to the public. Bloomberg studied the transcripts, finding, on average, about 25 references to laughter per meeting. This was almost half of the 45 giggles per FOMC meeting noted in 2007.
Jim Bianco, proprietor of an eponymously named research firm, as well as the source of the above chart, observed, "The FOMC was having a knee-slapping good time until everything hit the fan in 2007." Things got deadly serious in June of that year when Bear Stearns had to spend over $3 billion dollars rescuing two of its own hedge funds.
The Fed members, clueless though they may have been, weren't alone. The equity markets were also utterly unaware about what awaited them. After Bear rescued the hedge funds, its stock fell a mere two bucks, to $143.75. That was a spectacular shorting opportunity if there ever was one, and it showed that nearly everyone was completely in the dark.
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(Barry Ritholtz writes about finance, the economy and the business world for Bloomberg View. Follow him on Twitter @Ritholtz.)
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