As history will undoubtedly show, he is. Easy credit and deleveraging are what he was balancing and his only justification for Fed window expansion and TARP was to stop deleveraging. The better action at that point would have been an inflation bomb, a one time devaluation of debt. What we have instead is an open-ended commitment to Fed easing swayed by Treasury's need for low rates. The blame can't be completely on the Fed but certainly their method of putting out fires (smothering them with dry brush) is absolutely guaranteed to create new bubbles.
The problems with bubbles aren't just an "inflation" vs "deflation" balance as Bernanke may believe (those are side effects that he is not going to effectively control), but a malinvestment that cannot be corrected without real economic pain. Avoiding the pain by creating new malinvestment also steals resources from the rest of the economy and keeps it from recovering.
... but a malinvestment that cannot be corrected without real economic pain. Avoiding the pain by creating new malinvestment also steals resources from the rest of the economy and keeps it from recovering.
We can blame the Fed for many ills in the past, but they had to choose the "least of all evils," evils of malinvestments in real estate (and,correspondingly, the financials that serve the industry) that were caused directly by long-standing fiscal policies of several administrations and quite a few Congresses (the "carrots" by Fannie + Freddie + FHA and the "sticks" by CRA + the courts).
Fed wasn't the cause of malinvestment bubbles in real estate, at best it may have been a facilitator (particularly with rates lowered after 9/11 to spur the economy) because Fed only has the bluntest of instruments to work with. Unless and until the fiscal policies of "tax, borrow and spend" are changed, monetary policies will only reflect what kind of pain (symptoms) we will experience, and where it will hurt, but not how much of the pain we will have to bear.
We can argue about what kind of monetary "medicine" the Fed should impose on us to take, to alleviate some of the current symptoms, and how much pain to spread over what period of time, but we'll never get rid of the pains (in different "malinvested" places) until we get rid of the disease of Big Government, spending us into oblivion and dictating the future areas of public and private malinvestment bubbles and what we should spend on or "invest" in ("green economy" is the latest one, replacing the "ownership economy"). Using monetary policies to put out the fires caused by malinvestment bubbles caused by political considerations and fiscal policies, is a never-ending proposition and a great finger-pointing exercise for politicians; it's chasing after the symptoms instead of curing the disease. Having to use the Fed in such fashion is a "malinvestment" in its own right.
It's not institutions or industries that are Too Big To Fail we need to worry about, it's the Government Too Big To Succeed™!