by Calculated Risk on 10/15/2008 06:03:00 PM

Here are a few comments from the Q&A. The official stance of the Fed has been to ignore asset bubbles - others have argued that the Fed must consider asset prices as part of monetary policy. This has been an area of significant research in recent years for obvious reasons.

Here are some comments from Greenspan in 2002 after the stock bubble:

If the bursting of an asset bubble creates economic dislocation, then preventing bubbles might seem an attractive goal. But whether incipient bubbles can be detected in real time and whether, once detected, they can be defused without inadvertently precipitating still greater adverse consequences for the economy remain in doubt.
...
If the postmortem of recent monetary policy shows that the results of addressing the bubble only after it bursts are unsatisfactory, we would be left with less-appealing choices for the future. In that case, finding ways to identify bubbles and to contain their progress would be desirable, though history cautions that prospects for success appear slim.
Alan Greenspan, Issues for Monetary Policy, December 19, 2002

I don't think significant asset bubbles are really that hard to identify.

Here are Bernanke's comments from Bloomberg: Bernanke Weighs Limiting Consolidation, Asset Bubbles (hat tip James)

Federal Reserve Chairman Ben S. Bernanke said the central bank will consider discarding its long- standing aversion to interfering with asset-price bubbles and warned that the banking business may be concentrated in too few companies.

Officials should review how supervision and interest rates can minimize the ``dangerous phenomenon'' of bubbles in housing, stocks and other assets that risk bringing the financial system and economy down with them when they burst, Bernanke said.

``There is no doubt that as we emerge from the current crisis that we are all going to look very hard at that issue and what can be done about it,'' he told the Economic Club of New York in his broadest remarks on future regulatory changes since the credit crisis deepened last month.