housing bubble

Privatizer in Chief Obama Blames Reckless Homeowners

President Obama gave a speech on winding down Freddie Mac and Fannie Mae, the GSEs often blamed for the housing crisis and a darling of conservative ire.  Government sponsored enterprises, or GSEs buy up mortgages from private lenders and the theory is to loosen up funds to stir additional lending.

Missing the Housing Bubble

oopsThe Federal Reserve released FOMC transcripts from 2006. Yes, 5 years after the fact you too can find out what actually went on in the FOMC meetings.

In a nutshell, the Fed missed the housing bubble and it's impact on the economy.

Tim Geithner expressed confidence that "collateral damage" from housing could be avoided.

Most of the transcripts reveal a frightening embarrassment, especially now Treasury secretary Timothy Geithner praising now debunked former chair Alan Greenspan. Believe it or not the FOMC was worrying about inflation.

Matthew Yglesias points out we haven't seen nothin' yet. Wait until the transcripts are released for 2008 and 2009. Only then will we know the level of Fed foolishness.

The IMF evaluate the Chinese government's Five Year Plan and property bubble

In its latest Article IV country report on China, dated June 27 2011, the IMF reported on the potential for a property bubble, on the state of China’s banks and on the policy measures underpinning the 12th Five Year Plan. It also looked at the international implications stemming from China’s efforts to rebalance its economy by de-emphasising exports and raising domestic consumption. (Another strand to this “rebalancing” is a commitment to supporting the relocation of industries to the interior instead of having them clustered at the seaboard metropolises.)

Rebalancing, in the sense of moving from being export driven to having a much higher domestic consumption component, is something that it is far harder to say than it is to do. The Chinese authorities can, of course, decree anything they want, but that doesn’t always mean that their decrees will play out in the way that they expect.

GOP Spews Economic Fiction Again

wall streetIt seems the only thing most Republicans know about economics is the price of propaganda to get job killing corporate and special agendas through Congress. This time is a winner, winner, chicken dinner. For a $2 buck derivatives bet you can blame the poor and middle class.

Ya know the housing bubble, all of those derivatives, the sub-prime disaster, credit default swaps that caused financial Armageddon? Oops, not so, say four Republicans on the Financial Crisis Inquiry Panel. They hate truth so much, they are going to write their own report, a tale of spin built upon the weave of woe. Call it Goldisachs in Kansas, or My Pet Scapegoat, but do not call it anything founded in economic theory and financial statistical reality.

The four Republicans appointed to the commission investigating the root causes of the financial crisis plan to bypass the bipartisan panel and release their own report Wednesday, according to people familiar with the commission's work.

The Republicans, led by the commission's vice chairman, former congressman and chair of the House Ways and Means Committee Bill Thomas, will likely focus their report on the explosive growth of subprime mortgages and the heavy role played by the federal government in pushing mortgage giants Fannie Mae and Freddie Mac to purchase and insure them. They'll also likely focus on the Community Reinvestment Act, a 1977 law that encourages banks to lend to underserved communities, these people said.

Trying to reinflate the housing bubble with taxpayer dollars

The report out today says that the Federal Housing Administration is having the busiest year in its history.

Almost a year after the federal government launched its rescue of the housing market, nearly one in four new mortgages is insured by the Federal Housing Administration.
FHA loans also have become more popular because of the demise of many subprime lenders, which sometimes allowed buyers to purchase a property with nothing down and no documentation of income.

Remember what went wrong with the subprime housing market? People getting easy credit with "no skin" in the game buying houses they couldn't afford. Oh sure, there was massive fraud too, but that wasn't the cause of the bubble.
And yet, the federal government seems determined to do the exact same thing that got us into trouble in the first place. Only this time it is your taxpayer dollars that are financing it.

Two years later and still nothing has been learned

Two years ago Friday the financial crisis started.

Most financial media pundits and politicians didn't recognize that we had a problem until Lehman Brothers went under on September 15, 2008. The official start of the recession is marked at December 2007.

But the real start of the financial crisis was July 31, 2007, when Bear Stearns filed for Chapter 15 bankruptcy protection on its two major hedge funds (High-Grade Structured Credit Fund and High-Grade Structured Credit Enhanced Leveraged Fund).

And yet 24 months later, after all the job and capital losses, after all the heartbreak and stress on the average Americans, the financial media, the politicians, Wall Street, and most of the blogosphere still refuses to even acknowledge, much less address the root causes of our economic problems.

That's not how bubbles work

Robert Shiller, the co-creator of the S&P Case-Shiller Index, which tracks national housing prices, is a man that has earned a great deal of respect for his knowledge of the real estate market. Yet he is still guilty of saying the silliest of things.
For instance, the other day he said, "There could be another bubble...people have gotten very speculative in their attitudes toward housing."

To be fair, Shiller qualified his statement by saying he doesn't think another housing bubble is likely, or will happen soon. Nevertheless, that isn't how bubbles work.