The shock to the economy from the residential housing market’s decline was so severe that the ensuing recession was going to be painful and challenging, “regardless of the policy response,” Federal Reserve Bank of Minneapolis president Narayana Kocherlakota told a workshop at the bank Tuesday.
“We have come through a very difficult recession, caused in no little part by the large fall in residential housing prices that took place after 2006,” he said, according to a prepared text of his remarks released by the Fed. “I believe that the size of this shock meant that this recession was going to be a painful and challenging one, regardless of the policy response.”
