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Bubbles happen for many reasons. For the Housing Bubble, I blame the following in this order
1. The Fed
You saying the 'markets' don't work?
Markets work most of the time. Sometimes they don't work all the time. I've spent nearly 20 years in capital markets and have seen first hand how markets break down.
Did the Fed Cause the housing Bubble?
According to research by Ambrogio Cesa-Bianchi and Alessandro Rebucci, the housing bubble was caused by "regulatory rather than monetary-policy failures"
Economist's View: Did the Fed Cause the housing Bubble?
Regulators and policymakers enabled this process at virtually every turn. Part of the reason they failed to understand the housing bubble was willful ignorance: they bought into the argument that the market would equilibrate itself. In particular, financial actors and regulatory officials both believed that secondary and tertiary markets could effectively control risk through pricing.
http://www.tobinproject.org/sites/tobinproject.org/files/assets/Fligstein_Catalyst of Disaster_0.pdf
Banks used cheap capital to create a bubble. Their lending strategies fueled and fed off the housing bubble, and they did so using mortgage products whose performance was premised on continued growth of that bubble.
In that paper, there is a an "if-then" argument. "If" the Federal Reserve had to lower interest rates, "then" the government should have increased regulation.
First, in theory, that's absolutely correct. Take an extreme example. Had the government changed the law to require a 50% or higher loan to value, there would have been no housing bubble. The housing market would have collapsed, but there would have been no bubble.
Second, the authors didn't argue that there shouldn't have been deregulation. They were arguing that there should have been more regulation to offset the abnormally low interest rate. I don't know of any economist who was arguing that we should increase taxes in 2003 or 04 as the authors suggested. Paul Krugman went on 60 Minutes to argue that the government should inflate the housing market as stimulus.
But the first order was that the Fed kept interest rates too low for too long. The second order required increased regulation. Had the first order not existed, i.e. interest rates not been kept too low, there would have been no argument for the second order, that there should not have been a need for regulation.
Also, the authors seem to mis-understand how asset markets work. That housing prices were rising when the Fed was increasing rates is what we'd expect in a normal market, and it's not a priori evidence that the Fed was not being too loose. Markets tip over usually when credit is tight, not when the short end of the curve begins to rise.
Yes, underwriting standards declined substantially. That was a reason why the bubble happened.
However, the reason there was a decline in underwriting standards was because interest rates were lowered to levels that hadn't been seen in 60 years, which created a mismatch between assets and liabilities of financial entities. Those entities needed yield, and structured products gave them that return. So there was a huge demand for structured products. To fill the structured products, they turned to mortgages. Underwriting standards were lowered to fill the structures which were sold to investors demanding the products because bonds didn't yield enough. And bonds didn't yield enough because the price of fixed income was set too low.
after the Fed started to tighten its monetary-policy stance and the prime segment of the mortgage market promptly turned around, the subprime segment of the mortgage market continued to boom, with increased perceived risk of loans portfolios and declining lending standards. Despite this evidence, the first regulatory action to rein in those financial excesses was undertaken only in late 2006, after almost two years of steady increases in the federal funds rate.
When regulators finally decided to act, it was too late
Was it easy money or easy regulation that caused the housing bubble? | AEIdeas
Bubbles happen for many reasons. For the Housing Bubble, I blame the following in this order
1. The Fed
Then way down
2. Wall Street
3. Deregulation
Deregulation in financial services is usually a good thing in the long-term, but in the short-term, it can create bubbles, asset mispricing and economic collapse. There is significant empirical evidence from around the world that both are the case.
The actions of the Fed and the mispricing of credit spurred the second two causes of the collapse.
exactly, it was huge fed interventionist liberal policy to stimulate the economy through the housing market with cheap capital that created and sustained the bubble!! Thanks
WORLD WIDE ? lol
Yes. In fact, the Fed is the primary reason for why there were simultaneous housing bubbles around the world. The level of deregulation varied widely between countries that experienced housing bubbles.
The Fed controls the short-end of the curve and influences the long-end. All fixed income and credit products are priced either directly and indirectly off the US Treasury curve. Therefore, the Fed forces prices down, it affects credit creation in other countries since sovereign bonds are priced relative to Treasuries, and credit is priced as a spread above the the local government rate.
Bubbles happen for many reasons. For the Housing Bubble, I blame the following in this order
1. The Fed
yes I agree and lets not forget Fan/Fred. These were massive GSEs created by govt to interfere with the market in such a way as to get more folks in houses than the free market would allow. For liberals to blame the banks when we got too many people into houses is absurd.
THe free market is the only rational judge of how many people can afford homes.
Q When did the Bush Mortgage Bubble start?
A The general timeframe is it started late 2004.
Bubbles happen for many reasons. For the Housing Bubble, I blame the following in this order
1. The Fed
yes I agree and lets not forget Fan/Fred. These were massive GSEs created by govt to interfere with the market in such a way as to get more folks in houses than the free market would allow. For liberals to blame the banks when we got too many people into houses is absurd.
THe free market is the only rational judge of how many people can afford homes.
Yeah, GSE's around for 60+ years caused Dubya's subprime crisis 2--4-2007 *shaking head*
WORLD WIDE even....
exactly, it was huge fed interventionist liberal policy to stimulate the economy through the housing market with cheap capital that created and sustained the bubble!! Thanks
WORLD WIDE ? lol
Yes. In fact, the Fed is the primary reason for why there were simultaneous housing bubbles around the world. The level of deregulation varied widely between countries that experienced housing bubbles.
The Fed controls the short-end of the curve and influences the long-end. All fixed income and credit products are priced either directly and indirectly off the US Treasury curve. Therefore, the Fed forces prices down, it affects credit creation in other countries since sovereign bonds are priced relative to Treasuries, and credit is priced as a spread above the the local government rate.
yes I agree and lets not forget Fan/Fred. These were massive GSEs created by govt to interfere with the market in such a way as to get more folks in houses than the free market would allow. For liberals to blame the banks when we got too many people into houses is absurd.
THe free market is the only rational judge of how many people can afford homes.
Yeah, GSE's around for 60+ years caused Dubya's subprime crisis 2--4-2007 *shaking head*
WORLD WIDE even....
The federal reserve, you simpleton.
You saying the 'markets' don't work?
Markets work most of the time. Sometimes they don't work all the time. I've spent nearly 20 years in capital markets and have seen first hand how markets break down.
In that paper, there is a an "if-then" argument. "If" the Federal Reserve had to lower interest rates, "then" the government should have increased regulation.
First, in theory, that's absolutely correct. Take an extreme example. Had the government changed the law to require a 50% or higher loan to value, there would have been no housing bubble. The housing market would have collapsed, but there would have been no bubble.
Second, the authors didn't argue that there shouldn't have been deregulation. They were arguing that there should have been more regulation to offset the abnormally low interest rate. I don't know of any economist who was arguing that we should increase taxes in 2003 or 04 as the authors suggested. Paul Krugman went on 60 Minutes to argue that the government should inflate the housing market as stimulus.
But the first order was that the Fed kept interest rates too low for too long. The second order required increased regulation. Had the first order not existed, i.e. interest rates not been kept too low, there would have been no argument for the second order, that there should not have been a need for regulation.
Also, the authors seem to mis-understand how asset markets work. That housing prices were rising when the Fed was increasing rates is what we'd expect in a normal market, and it's not a priori evidence that the Fed was not being too loose. Markets tip over usually when credit is tight, not when the short end of the curve begins to rise.
after the Fed started to tighten its monetary-policy stance and the prime segment of the mortgage market promptly turned around, the subprime segment of the mortgage market continued to boom, with increased perceived risk of loans portfolios and declining lending standards. Despite this evidence, the first regulatory action to rein in those financial excesses was undertaken only in late 2006, after almost two years of steady increases in the federal funds rate.
When regulators finally decided to act, it was too late
Was it easy money or easy regulation that caused the housing bubble? | AEIdeas
Bubbles happen for many reasons. For the Housing Bubble, I blame the following in this order
1. The Fed
Then way down
2. Wall Street
3. Deregulation
Deregulation in financial services is usually a good thing in the long-term, but in the short-term, it can create bubbles, asset mispricing and economic collapse. There is significant empirical evidence from around the world that both are the case.
The actions of the Fed and the mispricing of credit spurred the second two causes of the collapse.
MORE conservative nonsense
"I don't know of any economist who was arguing that we should increase taxes in 2003 or 04 as the authors suggested."
So there was universal support of Bush's tax cuts for the rich? lol
David Stockman, Ex-Reagan Budget Director: George W. Bush's Policies Bankrupt The Country
(Reagans deficit policies) allowed George W. Bush to dive into the deep end, bankrupting the nation through two misbegotten and unfinanced wars, a giant expansion of Medicare and a tax-cutting spree for the wealthy that turned K Street lobbyists into the de facto office of national tax policy, Stockman wrote.
David Stockman, Ex-Reagan Budget Director: George W. Bush's Policies Bankrupt The Country
' Paul Krugman went on 60 Minutes to argue that the government should inflate the housing market as stimulus.'
LIE
Krugman needs to know enough to avoid snarky comments that could be taken seriously ten years later!
Another Day, Another Slander of Krugman
'But the first order was that the Fed kept interest rates too low for too long'
WORLD WIDE CREDIT BUBBBLE AND BUST
BUBBLES OCCUR BECAUSE OF GREEED AND SPECULATIOM, 100% OF THE TIME!
For the Housing Bubble, I blame the following in this order
1) Conservative ideology that people will ALWAYS act in the best interests of their employers (banks) and less regulation and banks self interests will ALWAYS stop people from overreaching (see greed)
2) Dubya's regulator failures, including but not limited to fighting all 50 states on predatory lenders, ignoring and gutting FBI white collar (1,800+ agents) after warnings of EPIDEMIC of mortgage fraud that could rival the Reagan S&L crisis and Dubya allowing the leverage rules to more than triple which flooded the market with money in 2004
3) Federal reserve policy. NOT stopping the predatory lenders was #1. Interest rates WAY down the list
9) Regulations. Plenty on hand to stop Dubya's regulator failure!
You NEVER addressed the WORLD WIDE credit bubble and bust though?
Q When did the Bush Mortgage Bubble start?
A The general timeframe is it started late 2004.
since you don't know this stated under clinton or you are lying, there's no point in reading the rest of your ignorance or lies
Markets work most of the time. Sometimes they don't work all the time. I've spent nearly 20 years in capital markets and have seen first hand how markets break down.
In that paper, there is a an "if-then" argument. "If" the Federal Reserve had to lower interest rates, "then" the government should have increased regulation.
First, in theory, that's absolutely correct. Take an extreme example. Had the government changed the law to require a 50% or higher loan to value, there would have been no housing bubble. The housing market would have collapsed, but there would have been no bubble.
Second, the authors didn't argue that there shouldn't have been deregulation. They were arguing that there should have been more regulation to offset the abnormally low interest rate. I don't know of any economist who was arguing that we should increase taxes in 2003 or 04 as the authors suggested. Paul Krugman went on 60 Minutes to argue that the government should inflate the housing market as stimulus.
But the first order was that the Fed kept interest rates too low for too long. The second order required increased regulation. Had the first order not existed, i.e. interest rates not been kept too low, there would have been no argument for the second order, that there should not have been a need for regulation.
Also, the authors seem to mis-understand how asset markets work. That housing prices were rising when the Fed was increasing rates is what we'd expect in a normal market, and it's not a priori evidence that the Fed was not being too loose. Markets tip over usually when credit is tight, not when the short end of the curve begins to rise.
Bubbles happen for many reasons. For the Housing Bubble, I blame the following in this order
1. The Fed
Then way down
2. Wall Street
3. Deregulation
Deregulation in financial services is usually a good thing in the long-term, but in the short-term, it can create bubbles, asset mispricing and economic collapse. There is significant empirical evidence from around the world that both are the case.
The actions of the Fed and the mispricing of credit spurred the second two causes of the collapse.
MORE conservative nonsense
"I don't know of any economist who was arguing that we should increase taxes in 2003 or 04 as the authors suggested."
So there was universal support of Bush's tax cuts for the rich? lol
David Stockman, Ex-Reagan Budget Director: George W. Bush's Policies Bankrupt The Country
(Reagans deficit policies) allowed George W. Bush to dive into the deep end, bankrupting the nation through two misbegotten and unfinanced wars, a giant expansion of Medicare and a tax-cutting spree for the wealthy that turned K Street lobbyists into the de facto office of national tax policy, Stockman wrote.
David Stockman, Ex-Reagan Budget Director: George W. Bush's Policies Bankrupt The Country
' Paul Krugman went on 60 Minutes to argue that the government should inflate the housing market as stimulus.'
LIE
Krugman needs to know enough to avoid snarky comments that could be taken seriously ten years later!
Another Day, Another Slander of Krugman
'But the first order was that the Fed kept interest rates too low for too long'
WORLD WIDE CREDIT BUBBBLE AND BUST
BUBBLES OCCUR BECAUSE OF GREEED AND SPECULATIOM, 100% OF THE TIME!
For the Housing Bubble, I blame the following in this order
1) Conservative ideology that people will ALWAYS act in the best interests of their employers (banks) and less regulation and banks self interests will ALWAYS stop people from overreaching (see greed)
2) Dubya's regulator failures, including but not limited to fighting all 50 states on predatory lenders, ignoring and gutting FBI white collar (1,800+ agents) after warnings of EPIDEMIC of mortgage fraud that could rival the Reagan S&L crisis and Dubya allowing the leverage rules to more than triple which flooded the market with money in 2004
3) Federal reserve policy. NOT stopping the predatory lenders was #1. Interest rates WAY down the list
9) Regulations. Plenty on hand to stop Dubya's regulator failure!
You NEVER addressed the WORLD WIDE credit bubble and bust though?
First, I'm not a conservative.
Second, I said no economists were saying we should raise taxes as the authors in your link argued.
Third, I addressed the global bubble in my following post.
Q When did the Bush Mortgage Bubble start?
A The general timeframe is it started late 2004.
Are you high or stupid? The Real Estate bubble was seen as a consequence back in 2001. It started before that.
MORE conservative nonsense
"I don't know of any economist who was arguing that we should increase taxes in 2003 or 04 as the authors suggested."
So there was universal support of Bush's tax cuts for the rich? lol
David Stockman, Ex-Reagan Budget Director: George W. Bush's Policies Bankrupt The Country
(Reagans deficit policies) allowed George W. Bush to dive into the deep end, bankrupting the nation through two misbegotten and unfinanced wars, a giant expansion of Medicare and a tax-cutting spree for the wealthy that turned K Street lobbyists into the de facto office of national tax policy, Stockman wrote.
David Stockman, Ex-Reagan Budget Director: George W. Bush's Policies Bankrupt The Country
' Paul Krugman went on 60 Minutes to argue that the government should inflate the housing market as stimulus.'
LIE
Krugman needs to know enough to avoid snarky comments that could be taken seriously ten years later!
Another Day, Another Slander of Krugman
'But the first order was that the Fed kept interest rates too low for too long'
WORLD WIDE CREDIT BUBBBLE AND BUST
BUBBLES OCCUR BECAUSE OF GREEED AND SPECULATIOM, 100% OF THE TIME!
For the Housing Bubble, I blame the following in this order
1) Conservative ideology that people will ALWAYS act in the best interests of their employers (banks) and less regulation and banks self interests will ALWAYS stop people from overreaching (see greed)
2) Dubya's regulator failures, including but not limited to fighting all 50 states on predatory lenders, ignoring and gutting FBI white collar (1,800+ agents) after warnings of EPIDEMIC of mortgage fraud that could rival the Reagan S&L crisis and Dubya allowing the leverage rules to more than triple which flooded the market with money in 2004
3) Federal reserve policy. NOT stopping the predatory lenders was #1. Interest rates WAY down the list
9) Regulations. Plenty on hand to stop Dubya's regulator failure!
You NEVER addressed the WORLD WIDE credit bubble and bust though?
First, I'm not a conservative.
Second, I said no economists were saying we should raise taxes as the authors in your link argued.
Third, I addressed the global bubble in my following post.
Libertarians are FARRRR right on economics
Weird, so Krugman and Comp weren't against the Bush tax cuts?
You 'explanation' is bogus on the fed causing a world wide credit bubble and bust when places, like Canada, that relied on GOOD GOV'T REGULATORS missed the Bankster created bubble!
First, I'm not a conservative.
Second, I said no economists were saying we should raise taxes as the authors in your link argued.
Third, I addressed the global bubble in my following post.
Libertarians are FARRRR right on economics
Weird, so Krugman and Comp weren't against the Bush tax cuts?
You 'explanation' is bogus on the fed causing a world wide credit bubble and bust when places, like Canada, that relied on GOOD GOV'T REGULATORS missed the Bankster created bubble!
I'm not a libertarian either. But I am a Canadian. And there's a housing bubble in Canada right now as there was before the crisis. Fitch just warned about it a few days ago.
I never said anything about the Bush tax cuts so I don't know why you keep mentioning it as if I did. I referenced the article in your link. The authors said we should have raised taxes on mortgage debt. No economists were saying that 10 years ago.
, like Canada, that relied on GOOD GOV'T REGULATORS missed the Bankster created bubble!
First, I'm not a conservative.
Second, I said no economists were saying we should raise taxes as the authors in your link argued.
Third, I addressed the global bubble in my following post.
Libertarians are FARRRR right on economics
Weird, so Krugman and Comp weren't against the Bush tax cuts?
You 'explanation' is bogus on the fed causing a world wide credit bubble and bust when places, like Canada, that relied on GOOD GOV'T REGULATORS missed the Bankster created bubble!
I'm not a libertarian either. But I am a Canadian. And there's a housing bubble in Canada right now as there was before the crisis. Fitch just warned about it a few days ago.
I never said anything about the Bush tax cuts so I don't know why you keep mentioning it as if I did. I referenced the article in your link. The authors said we should have raised taxes on mortgage debt. No economists were saying that 10 years ago.
