Obama’s jobs plan is nothing new

Oct 17, 2011 20:58 UTC

“And that’s why FDR brains-trusters Rexford Guy Tugwell and Raymond Moley acknowledged later that Hoover “really invented” all the devices of the New Deal. Frederick Lewis Allen might not have recognized that in 1940, but Joseph Nocera should. And if we don’t want to relive the Great Depression, as Nocera worries, then we’d better learn what didn’t work in 1929-33 any better than it worked in 1933-39.”

–David Boaz
The CATO Institute
“The Hoover Myth Marches On”

President Obama’s latest jobs proposal, where infrastructure banks and public works projects are the rage, has been blocked by the Senate. But each day another paper showing the way forward appears and demands more government spending.

Avoiding the errors of President Herbert Hoover and not allowing deflation to roar unchecked by government is the chief argument for more stimulus. Liberal gospel states that Herbert Hoover did nothing from 1929 to 1932 to staunch the tide of deflation and debt liquidation in the run up to the Great Depression, and that FDR acted decisively and saved the day.

But is this popular thread in the American economic narrative really correct? Did Hoover do nothing compared with the bold “action” of FDR? Or are Hoover, Roosevelt and Obama equally all interventionists?

Joe Nocera made this popular but erroneous point in his last New York Times column. But my friend David Boaz of the CATO Institute caught him in the act. In fact, Hoover did all the things that Obama has proposed and more. And Hoover only made things worse. FDR accelerated the growth of government greatly thereafter, but did so based upon the actions of his nominally Republican predecessor. Obama offers more of the same nonsense.

Hoover was a big government Republican who sought the Democratic nomination in 1920, a fact that makes Democrats cringe even today. But in a new Cato Institute study economist Steve Horwitz notes what Hoover really did to expand the scope of the government in the period leading up to the Depression.

In the study, Horwitz says that Hoover almost doubled federal spending from 1929 to 1933, expanded public works projects to “create jobs,” and pressured businesses not to cut wages, even in the face of deflation. Hoover signed the Davis-Bacon Act and the Norris-LaGuardia acts to prop up unions, he signed the Smoot-Hawley tariff, created the Reconstruction Finance Corporation, and proposed and signed one of the largest peacetime tax increases in US history, the Revenue Act of 1932, which raised income tax on the highest incomes from 25% to 63%.

Our liberal brothers who deride President Hoover as inactive and use him today as justification for even more federal debt and deficits need to find another argument. Hoover was the greatest technocrat of his age and not at all against government intervention. FDR would later expand this fascist model of Hoover into dozens of other parastatal agencies like Fannie Mae, the housing agency that arguably enabled and led us into the subprime crisis.

Proponents of further government intervention in the economy as a remedy for imagined Hoover inaction should also ponder one of my favorite U.S. economists, Irving Fisher. In Debt-Deflation Theory of Great Depressions (1933), he notes that the open market operations started by the Fed in the middle of 1932 had begun to address the deflation prior to FDR’s election six months later. Fisher wrote:

In fact, under President Hoover, recovery was apparently well started by the Federal Reserve open-market purchases, which revived prices and business from May to September 1932. The efforts were not kept up and recovery was stopped by various circumstances, including the political campaign of fear.

The campaign of fear was FDR’s attacks on business, a deliberate strategy to spread panic in the business community while a Democratic Congress thwarted the ability of the Fed and other agencies to help the economy and lend to solvent banks. Obama’s attacks on business — Dodd-Frank and socialized health care — seem very similar to the anti-growth actions of FDR.

When FDR said in his famous inaugural speech that “we have nothing to fear but fear itself,” he spoke of fear he had himself orchestrated for political reasons.  Roosevelt pretended to be concerned about the plight of his fellow citizens, but the real agenda of FDR and the Democrats then, as today with Barack Obama, was to achieve and retain power by making Americans more dependent upon the state.

Once the private sector was in disarray, from 1933 through the start of WWII in 1939, FDR and his fellow travelers began to experiment in socialist engineering with the New Deal. His attempts to regiment American society in imitation of the fascist models of Europe actually made the Depression far worse, but many Americans still think of FDR as a hero. Quite the reverse is the case, but never forget that Hoover enabled FDR.

Fisher told the American Economic Association in December 1933: “We should have been further on the road toward recovery today had there been no election last year. Recovery started under Mr. Hoover but … a recession occurred because of fear over political uncertainties.” In the days of intimidation and fear following the election of FDR, Fisher’s public statement against the new president took courage.

Sad to say, after four years of bank bailouts, incompetence, and trillions in wasted federal stimulus spending, we could say the same thing about Barack Obama. Americans need to focus on rapid restructuring and building sustainable economic renewal based on reality. If we do this we can break the cycle of boom and bust, end deflation in housing, and restore public confidence.


Obama has no job plan and never will.

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Are the low US home mortgage rates for real?

Oct 11, 2011 17:33 UTC

We hear on almost a weekly basis that mortgage interest rates in the US are at all-time lows. The annual percentage rates in mortgage advertisements seem near an historic nadir. The Fed has even begun to purchase long-dated mortgage backed securities (MBS) in an effort to push rates even lower and, hopefully, spur more refinancing activity.

But are these rates real? Are all American consumers, especially low-income borrowers, able to borrow at those low teaser rates? The answer in both cases is no. This is a crucial question, as we have discussed on this blog before. Home mortgage refinancing is the primary conduit for the Fed to provide liquidity to the US economy. In August of last year, I noted:

‘In every Fed easing event during my career in finance (1986, 1992, 1998, 2002), it was the wave of refinancing of debt after the Fed eased interest rates that put permanent disposable income into the hands of households,’ notes a former Fed official who worked in the banking industry for decades. ‘In this last easing, however, FNM, FRE and the TBTF banks have conspired to break the transmission mechanism for monetary policy and are now strangling the U.S. economy to save themselves from past errors.’

Since last year, little has changed. On Friday, Housing Wire reported that “Prepayments, mostly through refinancing, on mortgages backing Fannie Mae and Freddie Mac securities increased substantially in September, higher than what some analysts expected.” In fact, prepayment on FNM 4s surged over 100%, but the real story was the fact that prepayments on higher coupon FNM paper actually fell as shown in the table below.

Fannie Mae 30-Year Prepayments (September):

Coupon (vintage) Change in prepayment rate (%) Amount outstanding (B$)
4s (2009) + 130 102
4s (2010) +157 112
4.5 (2009) + 80 227
4.5 (2010) + 100 124
5 (2009) + 29 69
5 (2005) + 5 51
5.5 (2008) - 8 65
5.5 (2005) 0 45
6 (2007) - 4 62
6 (2006) - 8 43
6.5 (2007) - 13 16
6.5 (2006) - 9 17

Source: Fannie Mae/Absalon

While most of the business currently being written by banks and the GSEs is related to refinancing, the vast bulk of the loans are being written against relatively low coupon loans. Home owners with older, high coupon loans are largely excluded from the refinancing activity.

More, two of every three mortgage refinancings done by banks and guaranteed by the GSEs since 2008 have gone to higher income households. Low income families who need the benefit of lower rates are mostly locked out. One key telltale in the Fannie data about the discrimination against low income borrowers: The average loan size of the older, high-coupon loans is almost half that of new loans.

Notice that virtually all of the increases in prepayments were recorded in FNM 4s and 5s, while prepayment speeds actually fell for the older, higher coupon loans. The higher income households who held high coupon loans from the 2008 and earlier time frames have largely refinanced, leaving only the low income borrowers trapped by the GSEs and investors in MBS who do not want these needy American families to refinance.

Remember that the Fed is already diverting more than half a trillion dollars a year from savers to the banks through low interest rates. The behavior of the GSEs and the top four banks – JP Morgan, Bank of America, Citigroup and Wells Fargo – which prevent lower income Americans with performing loans to exercise their contractual right to refinance borders on the criminal. But in terms of public policy, the blockade by the GSEs and the zombie banks is blocking the Fed’s efforts to reflate the consumer sector and help the US economy.

Treasury Secretary Tim Geithner has stated that the Obama administration is moving forward with plans to help more homeowners refinance out of higher rates. But Congress and members of the media should ask Secretary Geithner why he has been dragging his feet with respect to forcing the GSEs to refinance all of these older, high coupon loans to help the most needy Americans. The fact that Geithner and Federal Housing Finance Administration chief Ed Demarco are responsible for blocking more than 30 million American families from refinancing their mortgages is an outrage.

What should be done? In a presentation to the Mortgage Bankers Association in Chicago the other day, Alan Boyce of the Absalon Project listed a number of steps that Geithner and the White House need to embrace. Obama should require FHFA to direct GSEs to use all tools available to stimulate more home refinancings. Specifically:

•Eliminate loan level pricing adjustments for the refinancing of ALL loans currently guaranteed by the GSEs

•Eliminate the 25bp “Adverse Market Fee” imposed after the government takeover of Fannie and Freddie.

•Eliminate appraisals and paperwork as part of a new “Super-Streamlined” refinance program

The key requirement is that the borrower be current on the existing mortgage that is guaranteed by the taxpayers. Boyce believes that following this approach will have big benefits. Some 25 million new refinancings from 32 million tax payer backed loans will reduce mortgage payments of about $51 billion. Lower income borrowers will get over half of these savings.

And there are big benefits for the banks. Underwater borrowers at greatest risk of default will get some financial breathing room. Improved labor mobility provided by refinancing will reduce unemployment and also help to lessen the chance of a second wave of loan defaults. And, most importantly, the single biggest obstacle to the Fed’s efforts to add liquidity to the consumer sector will be removed. The hour is late, but prompt action now can make a big difference to the economy in 2012 and beyond. Does President Obama have the courage to act?


Please remember that an unknown percentage of the high coupon loans have seconds which will need to be resubordinated. What do your numbers look like when you screen out the loans with seconds (and thirds)?

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“Reckless Endangerment” and the unwritten history of Washington

Jul 14, 2011 15:45 UTC

Some disclosures: I review the new book, “Reckless Endangerment: How outsized ambition, greed, and corruption led to economic Armageddon”, by Gretchen Morgenson and Josh Rosner, not because both authors are my friends. They are.  Nor do I review this book because it concisely summarizes the confluence of public policy and private avarice we all know as the subprime mortgage crisis. It does, and more.

No, I review this book because it names names. Names and more names, one after another, in that prosecutorial serial fashion readers of Morgenson know very well. The kind of relentless recitation of the facts and names meant to allow readers to follow the logical chain of a criminal act to an indictment.

With Rosner as the ferret of public and not so public data and Morgenson as the journalistic filter and wordsmith par excellence, the book delivers a readable yet detailed account of the people behind the mortgage debacle. When the show trials begin, the judges will have a copy of “Reckless Endangerment” close at hand.

The tale of how Washington played a crucial enabling role in the mortgage mess is a topic I have discussed with Rosner over many years. Morgenson and her fellow scribes at the New York Times have chronicled the debacle on a national scale, though Morgenson does so with a tenacity and sense of public indignation that probably irks some of her more pro-Wall Street peers on the Times’ business page.

This book soundly repudiates the notion that Wall Street led the subprime parade. Instead, it confirms that government intervention going back to FDR and the New Deal set the stage for a public-private orgy decades later. The book describes how government sponsored entities such as Fannie Mae, banks such as PNC Financial, corporations such as Sears Mortgage and private mortgage insurers  such as MGIC, led the way in the fall of 1993 to redefine the government-backed mortgage market, a market that has been backed by the government since the 1930s.

Recall in the early 1990s, when Citibank started to experiment in private mortgage securities coming out of the S&L crisis. Citi, Chase Manhattan and other large banks nearly failed just years earlier. Thus the move by Fannie Mae and the other members of the affordable housing coalition in 1993 to eventually broaden the definition of “conforming loans” to include loans with inferior credit quality and loans with private mortgage insurance is a key political event in the subprime crisis timeline, and also a sop for the big banks. Think of today’s real estate crisis starting in the 1980s, but delayed and made larger by the affordable housing coalition and Alan Greenspan’s Fed. This book tells that story.

Reckless highlights the relationship between former Fannie Mae CEO James Johnson, a Washington player who was a top adviser to Vice President Walter Mondale and former Countrywide CEO Angelo Mozilo. That fateful pairing of Johnson and Mozilo helped take the changes made in Washington to the legal framework of the government mortgage market and catapult them to the stratosphere on Wall Street.

The authors nicely describe how Johnson was the architect of “the disastrous home ownership strategy promulgated by William Jefferson Clinton in 1994. Johnson, after becoming chief executive of Fannie Mae in 1991 and under the auspices of promoting home ownership, partnered with home builders, lenders, consumer groups, and friends in Congress to transform Fannie Mae into the largest and most influential financial institution in the world.” Today, Fannie Mae is under government control again, after decades of being highjacked by various private agendas set by the affordable housing mafia.

The larger banks on Wall Street were not just copying and perverting the government market for mortgages. They also took example from Countrywide, Bear Stearns and the smaller, more aggressive mortgage firms. Countrywide, a firm that was an insurgent real estate company a decade before, grew to the point where by the end of 2005 it was a $250 billion asset national bank that was turning over its balance sheet three times a year.

Countrywide was selling most of that vast flow of new loan origination to Fannie Mae and Freddie Mac, but also sold a large chunk to private investors. Now Bank of America, which acquired Countrywide in 2008 for just $4 billion, faces tens of billions of dollars in legal claims arising from the Countrywide mortgage securitization franchise. Even today, years after the financial crisis began, Bank of America still faces the possibility of a restructuring because of the legal claims against Countrywide.

This fast moving book follows Johnson and Washington contemporaries such as former Treasury Secretary Robert Rubin through the Clinton years and into the mortgage boom years of 2004 and beyond. By then Johnson was sitting on the board of Goldman Sachs, the authors note, and setting the salary for then-Goldman CEO and later Treasury Secretary Hank Paulson. “Reckless” illustrates that people like Johnson, Rubin and Paulson, even when they reach the limit of their incompetence and fail miserably in positions of public trust, still seem to rise in power and private wealth.

“It is indeed one of the most frustrating aspects of this story — the rise of subprime, the dereliction of duty by so many who participated in the mortgage mess,” the authors note in a harmony that reflects both voices. “The cast of characters that helped create the mess continues to hold high positions or are holding jobs of even greater power.”

Hopefully with books such as “Reckless”, the frustrating fact of the impunity of money and power, graphically illustrated in this book, will change, and public officials will again start to act in the public interest — instead of their own.



I have to disagree. Angelo Mozilo was born in 1938 so he would be unlikely to live long enough for your ideas to inflict suffering commensurate with his lifetime achievements.

He should receive a very speedy trial under RICO that results in the confiscation of all of his assets, even those he has carefully hidden away. Then, he should be incarcerated somewhere nice like the Federal Pen in Sandstone, MN where he can spend the remainder of his life cleaning the latrine.

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On debt ceilings and conforming loan caps

Jul 11, 2011 21:56 UTC

“The dollar is our currency, but your problem.”

–Former Treasury Secretary John Connally

As the deadline nears for raising the US debt ceiling, the advocates of extend and pretend are attacking anyone and everyone who says that the federal debt ceiling should not be extended without extracting serious spending cuts. The Democrats in Congress see the proverbial writing on the wall, namely that 80 years of borrow and spend as the national ethic is about to end. Unfortunately neither the Democrats nor Republicans in Washington can see little else.

The fight over the budget is more than a fiscal debate, but also suggests the death knell of the two-party system in America. The socialist tendency we know as the Democratic Party is, to paraphrase President Ronald Reagan, the party of government. Prior to 1932, the Democratic Party was only marginally competitive in national politics. From FDR on through to today, the Democrats built their political fortunes on ever-increasing public spending and a corrupt relationship with the private and public sector unions.

Many Democratic political careers and institutions are now under attack in Washington as the Treasury is nearing the ends of its ability to borrow. Consider that current tax revenues just about cover transfer payments, where Washington taxes one American and subsidizes another. This leaves all of the other operations of government funded by debt. The reason for the conflict over the debt ceiling is obvious — except for members of the Democratic party and their surrogates in the big media.

“Bill Clinton was an Eisenhower Republican, but Obama is a more of a Nixon Republican, betraying core liberal beliefs on many issues,” notes economics writer and former Treasury official Bruce Bartlett, who sees President Barack Obama eventually cutting a spending deal with Republicans with less “smoke and mirrors” than President Clinton would never have accepted.

Back in April, we talked about why a delay in raising the debt ceiling is not the end of the world (see “Default, debt ceilings and democracy”). If it takes a financial crisis to change the fiscal behavior of the US, then so be it. You need courage to say no to more debt, but it is easy to borrow. The people of the US have the right and even the obligation to withhold approval of further debt issuance unless real changes are made in federal spending.

The Democratic party headed by Obama is making common cause with the large banks and corporations in the US to raise the debt ceiling without making significant cuts in federal spending. Big companies hate spending cuts, but don’t really worry about things like inflation. This quarter’s earnings is all that matters.

Ironically enough, the pro-democracy movement in American politics is now defended by the Republican Party, which finds itself almost forced to become more populist with each passing day. This is an uncomfortable position for established members of the GOP, many of whom are functionally indistinguishable from their Democratic peers on fiscal issues. With each election, though, the fiscally conservative tendency among conservatives is coming to dominate the Republican leadership. Even mainstream conservatives such as John Boehner cannot hold back more radical fiscal and social agendas of the GOP.

As the two institutional political parties wrestle over national spending, and paying attention only to each other, the US economy is entering a new and potentially dangerous period of deflation. The continued process of de-leveraging in the financial sector is causing banks to shrink and credit availability to dry up. And the government is about to make things a lot worse by allowing the conforming limit for loans sold by banks to federal housing agencies like Freddie Mac and Fannie Mae to fall dramatically.

After September 30, 2011, the maximum loan limit for single family homes in San Diego, CA, will fall from  $729,000 to $483,000 or to the pre-July 2007 levels. What this means is that the amount of mortgage financing available to markets all over the US is going to drop dramatically. While there are many markets where there will be little or no change, the markets most affected are also the areas where banks have the most exposure to future credit losses, the east and west coasts in particular.

“These housing markets are going to get clubbed to death like baby seals,” said one mortgage market veteran who assembled a list of the counties where the conforming loan limit is likely to drop the most.  The impact of this change is already being felt in real estate markets around the nation, especially in markets such as Washington, DC, New York, Los Angeles and Southern California. The maximum loan limit for Fairfax County, VA, dropped from $729,000 to just over $600,000.

The impending decrease in the conforming loan limit will accelerate the drop in home prices this year, adding fuel to the fires of deflation. Even as President Obama and the Democrats draw a line in the sand against spending cuts, the inattention of the White House to accelerating deflation in the housing market is creating a new crisis.

The Republicans welcome crisis as a means to destroy the Democrats as a national political force, but at what price?  The Democrats are resisting budget cuts, and in doing so only give the GOP the crisis that they seek. By the time the 2012 election cycle begins in earnest, for President Obama and both political parties, raising the debt ceiling will be the least of our problems.



I cannot believe that Obama, the man that is suppose to protect the American people is now using scare tactics and threating the American people with their social security checks. You go right ahead and do this and watch we the people go absolutely crazy. How dare you use scare tactics and threaten with social security. Your trying to shove what you want down our throats just like you did with medical reform. We need some reform alright within our government starting with you,Obama. Threatening U.S. American forces with their checks. That looks real good while Michelle is on her little campaign to help them.I find it an outrage for you to even say such a thing. The money is there for s.s. myself and everyone I have spoken with are highly ticked off at your statement. You need to raise taxes on the rich like you promised to do. If you would have done this right off the bat I’m sure it would have helped to keep our debt down. You have done nothing but drive this country further in debt and know you want to make the American people pay for it. You are like a spoiled little child. My way or the highway. You are the one who is not willing to compromise. You better think long and hard before you even think about spewing those words out of your mouth again. How dare you, and shame on you Mr.President,SHAME ON YOU!!!!!!!!!!!!!!!!!!!!!!!You go right ahead and hold those checks and see what happens. If I’m this ticked off you can just imagine what the rest of America is thinking.Never in my life have I ever seen another President use scare tactics and it’s quite disgusting.You make me sick!!!!!!!!!!!!!!

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As Obama and Congress fiddle, America liquidates housing sector

Mar 29, 2011 13:28 UTC

Republicans in the House of Representatives are busily assembling several legislative proposals to reform the housing sector and reduce government support for the secondary market in home loans used by banks to manage their liquidity.

According to Joe Engelhart at CapitalAlpha Partners: “House Republicans are considering an ambitious series of standalone legislative initiatives to reduce the role of Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) over the next five years.”

Meanwhile, President Barack Obama has started another war in the Middle East with his political soul mates in the EU.  The President has also embarked upon an ambitious schedule of foreign tourism and domestic campaign stops, but nothing of substance.

Obama is compared by some to Louis XIV XVI (and Mrs. Obama to Marie-Antoinette)  in terms of his detachment from the nation’s priorities, particularly the ongoing meltdown in the housing sector.

“Pres. Barak Hussein Obama has given new meaning to that epithet “imperial presidency,” my friend Sol Sanders opines.  “It was slung at Pres. Richard Nixon not only for his extravagant “palace guard” — some in kitschy uniforms — but his more serious unconstitutional overreach.  But if imperial in his style, Mr. Obama reigns; he does not rule.”

In many ways, the current national policy mix of more regulation, decreased government subsidies and, to add further urgency, a shrinking banking system, is the perfect storm for the housing, which is now down six months in a row.  Despite my long-held desire to see market-based reform in the US housing sector, I think all parties need to be aware of the precarious situation facing the American economy and banks as home prices collapse for lack of credit.

The slide in home prices and receding bank lending footprint is one of the reasons why at my firm we have begun to talk about putting aside structural reform of the housing sector this year and instead increasing the size of the loans guaranteed by the government, even while raising the cost of such “g fees” as they are called by housing market mavens.  Without credit, the real estate sector is left with a cash market liquidation with grave implications for financial intermediaries and investors.

We wrote this week in The Institutional Risk Analyst, “Wanted: Private Investors Seeking First Loss Exposure on RMBS, March 28, 2011,” about some of the details of the secondary mortgage market.  In simple terms, there is about $11 trillion in financing behind the real estate sector: $4.4 trillion in the portfolios of banks, $5.5 trillion in agency securitizations guaranteed by Uncle Sam, and $2 trillion or so in private label securities.

In order to believe the claims of my conservative friends about “reform” of government agencies like Fannie Mae and Freddie Mac you must believe that some of the $5.5 trillion in no-risk agency securities is going to be willing to migrate into the bucket of private label securities, where investors take actual credit risk.  It is unlikely that we are going to see any significant increase in the private market home loans unless interest rates rise significantly.

The net, net here is that the available pool of credit available for the housing sector is shrinking and thus prices must also decline to adjust for that supply of credit.  This fact of continued decline in home prices is going to have a chilling effect.

As we wrote in The IRA this week: “It is no accident that states such as Illinois, Nevada, Missouri, and Maryland are all considering legislation to ban appraisers from using involuntary foreclosure sales in home valuations. In a rational world where programs such as HAMP were really effective to restructure underwater loans and, of necessity, say 50% of all HELOCs were written down to zero, both the Too Big To Fail banks and the private mortgage insurers would be insolvent. ”

This week regulators are starting to work on the risk-retention rules of the Dodd-Frank legislation, yet another point of friction that is making it more difficult for Americans to obtain housing credit.  The political fight over what constitutes a “qualified residential mortgage,” which does not require banks to keep 5% of the risk, will only marginally effect the deflationary forces now working on the housing sector.

While the media will be fascinated by all of this insider play over the “QRM”, the real story is out in the housing market, where more than half of all home sales this year will be involuntary foreclosure liquidations.  The slow erosion of home prices is likewise eating away at the willingness of lenders to take risk in real estate, thus the 4% decline in loan balances YOY according to the FDIC.

I estimate that Fannie and Freddie alone are hiding $200 billion worth of bad loans on their books simply because there is no market for these foreclosed homes.  Ditto for the largest servicer banks such as Wells Fargo, Bank of America, JPMorgan Chase and Citigroup.  To clean up this mess with finality is going to cost $1 trillion or so in round numbers.  But nobody in Washington wants to go there.

The Obama Administration and the Congress need to put aside their respective fantasy world views and focus on the horrible economic reality ongoing in the housing and banking sectors.  It may be that the degree of self-delusion in Washington has reached the point that only another financial catastrophe can wake us from out collective distraction.  But if President Obama really believes he can win reelection with housing prices falling from now till November 2012, then perhaps those who liken him to Louis XIV XVI are right.

Editor’s Note: The piece has been updated with the correct regnal number for Louis.


The reason the housing bubble inflated is because there was a disconnect between borrowers and lenders. The disconnect was facilitated by Nationally Recognized Statistical Organizations (Fitch, Moody’s, S&P) and government guarantees and by government loan guarantees.

Twenty percent down and requiring originators to keep a large proportion of the loans they fund on their balance sheet would fix the problem. In fact it would have prevented the problem from occurring in the fist place.

Central planners always have such complicated solutions.

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