If the housing crisis has made the Federal Reserve aware of anything, it’s for the central bank’s economists to be more aware of the pitfalls of bad public policy, said James Bullard, president of the Federal Reserve Bank of St. Louis.

The U.S. has spent decades overemphasizing the virtues of the American Dream – closely linked with homeownership.

"In the stark light of recent events, many households found that the reality of homeownership was a nightmare rather than something idyllic," Bullard said.

He explained, "Poor public policy undoubtedly contributed to the housing bubble and the resulting recession."

Additionally, the St. Louis Fed president noted that his predecessor Bill Poole foresaw and warned about many of the issues resulting from the "badly overleveraged government-sponsored enterprise Fannie Mae and Freddie Mac" due to his background in economic research.

"Research can play a major role not only in the design of wise policies, but also in avoiding the continuation of unwise policies," Bullard added.