CHICAGO—When Ben Bernanke spoke at last week's NIC National Conference on seniors housing, he illustrated one of the reasons the housing market has not yet fulfilled its post-recession potential. He told the story of a well-to-do homeowner who could not get a loan to refinance his home. The name of the homeowner? Ben Bernanke. “I recently tried to refinance my mortgage and I was unsuccessful in doing so,” the former chairman of the Federal Reserve told an assembled lunchtime throng of more than 2,000 at the Sheraton Chicago Hotel & Towers.

Although he recognized that the housing market was spooked by a collapse which followed years of easy credit, the fact that someone considered a great credit risk by any rational standard was denied a refinance means “we've gone a little too far.” He recommended that lenders lighten up a bit. If they don't it could impact the economic well-being of an entire generation. “The first-time homebuyer market is not what it should be,” he pointed out, and millennials especially have struggled to establish households.

The personal revelation came in the midst of a public discussion between Bernanke and Mark Zandi, chief economist of Moody's Analytics, on the state of the economy and how it would affect the world of real estate. Zandi began by asking the former chairman whether the economy was now on a sounder footing than it was before the near-meltdown of 2008.

“I think the banks are more resilient,” Bernanke replied. He attributed much of this strength to the Dodd-Frank legislation, which, while not perfect, gave policymakers tools to handle financial panics that they had sorely lacked during the crisis. Before Dodd-Frank, federal officials could not adopt a systemic approach when trouble loomed. Referring to the collapse of Lehman Brothers Holdings Inc. in mid-September 2008, he said, “if Lehman happened again it could be disassembled without broader affects on the financial system.”

Bernanke also derives some comfort from new requirements that banks pass stress tests and retain more capital. But Zandi wondered if these regulations could push lending out into shadowy areas not covered under current law. Bernanke admitted that one of the main challenges over the next few years will be to make “sure we're not just driving bad behavior into dark corners.” Still, “the cost of the crisis we just had was so enormous” that he thinks banks recognize how necessary the changes were and will learn to make loans under the new limitations.

Zandi concluded the session by asking Bernanke how he responded to all the people who have worried about rising inflation and advocated for years that the Fed raise rates. “It's just not right,” Bernanke said. He and most others at the Fed had believed with a great deal of confidence that the US economy was operating below potential and that the risk of inflation was quite low. “I hope they understand that they were wrong.”