Can this guy predict the next financial crisis?

at 09:37 AM ET, 12/20/2011

Dick Berner didn’t foresee the 2008 financial crisis. But he was among the first to predict the economic downturn that led up to it. In late 2007, as an economist at Morgan Stanley, Berman forecast a recession in 2008 due to a significant housing slump, a weakening job market and higher energy costs while most other major financial firms were still sanguine about the economy’s prospects (you can see him interviewed on “Charlie Rose” here). President Obama has now chosen Berner to become the government’s oracle for the U.S. financial system, charged with foreseeing the next big threat before catastrophe comes down the pipe.

On Friday, Obama nominated Berner to lead the new Office for Financial Research, created under Dodd-Frank to gauge potential risks to the system by analyzing data from financial firms. Brought on as a counselor to Timothy Geithner, Berner has already been leading the effort to establish the office under the Treasury Department this year. But like many other aspects of Wall Street reform, the OFR has been slow to get off the ground. Meanwhile, risks to both the U.S. and global financial system have multiplied as the euro-zone debt crisis has ballooned. Supporters argue that the OFR could help the U.S. gauge our exposure to the euromess, and the looming threat may have encouraged the White House to get the office fully off the ground.

Berner’s private-sector background might help him win over some Republicans during the nomination process. He was a 2009 stimulus skeptic who believes that the Obama administration didn’t take all the right steps to resolve the housing crisis. But as with the more controversial Consumer Financial Protection Bureau, GOP resistance will likely focus on the existence of the Office of Financial Research itself, which one House Republican described as “Orwellian” in nature for its access to private firms’ information and concerns about privacy.

Berner, of course, hasn’t always been on the mark with his forecasts. In 2010, as chief economist at Morgan Stanley, he made some overly optimistic predictions about GDP growth for late 2010 and 2011, bullish that credit would loosen and employers would begin hiring again. Some people “think I’m out of my mind. But I have a conviction in my beliefs that’s based on my analysis,” he told the New York Times in 2010. But Berner also warned around the same time that Greece’s debt crisis was a serious concern and a threat to European stability.

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