Comments on: Greenspan and the Housing Bubble http://www.arnoldkling.com/blog/greenspan-and-the-housing-bubble/ taking the most charitable view of those who disagree Mon, 21 Dec 2020 00:12:22 +0000 hourly 1 https://wordpress.org/?v=4.0.32 By: Larry http://www.arnoldkling.com/blog/greenspan-and-the-housing-bubble/#comment-184933 Fri, 25 Oct 2013 02:29:58 +0000 http://www.arnoldkling.com/blog/?p=2084#comment-184933 Yes, the Fed could have spoken about the micro problems of credit deterioration, excessive subsidies, etc., as long as it didn’t actually think that changing monetary policy was the solution.

]]> By: Mark T http://www.arnoldkling.com/blog/greenspan-and-the-housing-bubble/#comment-184282 Thu, 24 Oct 2013 20:32:37 +0000 http://www.arnoldkling.com/blog/?p=2084#comment-184282 The real issue is margin (or, in the case of single family residential housing finance, the lack thereof). Or in more recent parlance, “macroprudential regulation”. When NASDAQ had a bubble burst, it barely registered in GDP. That is because, no matter how big the bubble, there is at least a 50% equity cushion in it, which absorbs the drop in value first. Because housing finance, and intermediaties’ financing of housing finance, had no margin to speak of come 2007, the drop in value flowed straight through to the real economy much more directly and quickly. If every actor in the chain of housing finance had been required to maintain a 20%+ equity stake in its extensions of credit, there would never have been a crash.

]]> By: Arnold Kling http://www.arnoldkling.com/blog/greenspan-and-the-housing-bubble/#comment-183378 Thu, 24 Oct 2013 12:08:42 +0000 http://www.arnoldkling.com/blog/?p=2084#comment-183378 the link you posted has a very helpful timeline. Thanks.

]]> By: dve http://www.arnoldkling.com/blog/greenspan-and-the-housing-bubble/#comment-182379 Thu, 24 Oct 2013 01:34:15 +0000 http://www.arnoldkling.com/blog/?p=2084#comment-182379 Am I missing something, or does this link raise the issues, at least in part, that you allude to? http://www.thehispanicconservative.com/General/the-fanny-mae-and-freddie-mac-debacle.html

]]> By: kebko http://www.arnoldkling.com/blog/greenspan-and-the-housing-bubble/#comment-179486 Wed, 23 Oct 2013 00:50:12 +0000 http://www.arnoldkling.com/blog/?p=2084#comment-179486 I realize this sounds crazy at first, but the housing boom was caused by tight money and the bust was caused by tighter money:
http://idiosyncraticwhisk.blogspot.com/2013/08/real-interest-rates-and-housing-boom.html

]]> By: MG http://www.arnoldkling.com/blog/greenspan-and-the-housing-bubble/#comment-178708 Tue, 22 Oct 2013 16:28:45 +0000 http://www.arnoldkling.com/blog/?p=2084#comment-178708 You can always believe that “the left…suggested that — fill any name here — benign view of the markets blinded him to — fill many bad things that could happen, in hindsight.” But one of them is not promoting easier credit to support housing.

If anything, it was the Austrians who riled against the excesive credit expansion. Their criticism would have been dead on had they focused it to the excesses of leverage and its effect on financial instability, instead of the inadequacy of the level of interest rates and its effect on inflation.

]]> By: R Richard Schweitzer http://www.arnoldkling.com/blog/greenspan-and-the-housing-bubble/#comment-178598 Tue, 22 Oct 2013 14:50:46 +0000 http://www.arnoldkling.com/blog/?p=2084#comment-178598 As I recall, Alan Greenspan did, repeatedly, warn Congress (both houses) [Sarbanes assembled!] as to the *extreme* concentration of risks at and through Fannie and Freddie.

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