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Economists: Interest Rates Fueled Boom

(AP Photo/Jose Luis Magana)
Of all the economic factors that possibly fueled the inflation of the housing bubble last decade, Federal Reserve Chairman Ben Bernanke has said low interest rates weren't one of them. The Wall Street Journal Wednesday published the results of a survey showing that the nation's economists haven't exactly fallen in line behind the chairman on that.

Two surveys the newspaper launched this week presented a healthy amount of reasonable doubt that interest rates set by the government contributed to 2008's crash of the housing market which affected the financial system. In one survey of economists on Wall Street and elsewhere, 42 of 54 said low interest rates partially contributed to the market's bubble. Another survey showed that 13 of 27 academic economists who study monetary policy agreed that the low rates helped the housing boom.

Bernanke is facing confirmation hearings in the Senate after President Obama nominated him to serve another six-year term as chairman. The Federal Reserve sets several interest rates, including one for what banks lend each other.

The newspaper's report comes as the Financial Crisis Inquiry Commission is scheduled to begin its hearings into what caused the near-collapse of the nation's financial system in 2008.

Among the panel's first witnesses are top executives at four major banks - Lloyd C. Blankfein of Goldman Sachs, Jamie Dimon of JPMorgan Chase, John J. Mack of Morgan Stanley and Brian T. Moynihan of Bank of America.

Wednesday's hearing is scheduled to begin at 9 a.m.

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