If only we’d had more power, we could have kept the financial crisis from getting so bad.

Ben Bernanke, the Fed chairman, has said it is difficult “to know in real time if an asset price is appropriate or not.”

That has been the position of Ben Bernanke, the Federal Reserve chairman, and other regulators. It explains why Mr. Bernanke and the Obama administration are pushing Congress to give the Fed more authority over financial firms.

So let’s consider what an empowered Fed might have done during the housing bubble, based on the words of the people who were running it.

In 2004, Alan Greenspan, then the chairman, said the rise in home values was “not enough in our judgment to raise major concerns.” In...