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Yes. Greenspan was a huge problem.
And now the bernanke has taken his place...
Yes. Greenspan was a huge problem.
Yes. Greenspan was a huge problem.
And now the bernanke has taken his place...
...Yes, this crisis was avoidable. To avoid it, we would have had to do a number of things differently. The first is to alert the authorities, beginning in the 1930s, that federal policies designed to encourage homeownership — well-intentioned though they have been — would create, and today continue to sustain, a set of economic incentives driving vast amounts of capital from around the world into the U.S. residential real-estate market. From the Federal Housing Administration to Fannie Mae and Freddie Mac to the mortgage-interest deduction, U.S. government policies distorted the market, creating a massive misallocation of capital under the naïve theory that housing prices only move in one direction: up.
The second action would be to prevent the dot-com bubble of the 1990s, of which the housing-market meltdown was both an echo and a consequence. Like the real-estate bubble, the dot-com bubble was cheered on by the American government, the American consumer, and the American banker, because nearly everybody likes appreciating asset prices and the illusion of wealth that accompanies them. When the dot-com bubble burst, Washington responded the way Washington always responds: by slashing interest rates, hoping that a sluice of cheap money and easy credit sloshing through the economy would stimulate productive economic activity, or the illusion of productive economic activity, sufficient to disguise the damage done by the bubble. Having been burned by unprofitable start-ups at home and disappointing emerging-market investments abroad, a great many Americans decided to invest that easy money in houses. Washington was keeping interest rates down and encouraging the loosening of mortgage-lending standards; at the same time, Washington’s creatures, Fannie Mae and Freddie Mac, helped give the mortgage market enough liquidity to alarm Noah. They were helped mightily in that endeavor by the rise of massive savings in China and elsewhere in the developing world, all of which went looking for somewhere to invest: Where better than the American mortgage market, where a great many of the underlying loans were insured by the government or its proxies?
Third, we would need to convince a great many Americans not to take out mortgages they could not afford should their houses fail to appreciate, and convince a great many financial managers not to make bad investments large enough to bring down their firms....
The dot-com bubble actually destroyed more wealth than did the decline in housing prices; the housing meltdown became a crisis because the related securities losses were concentrated in a small number of firms, and because those firms were dramatically over-leveraged. If there is a public-policy proposal to be extracted from this mess, it is that in a world of “too big to fail” banks — and, like it or not, that is the world in which we live — large financial institutions should be subject to tighter leverage controls, with higher standards for capital reserves and liquidity...
well with the fed now leveraged at a multiple of 81x, we'll soon see how much of a mistake this was.
(people laugh when i say it, but i say it so you'll be amazed when it happens. get ready for $20 can of corn.)
Almost eleven percent of American homes are empty: News Headlines