Bubbles Bernanke has launched an "O"ffensive pointing fingers in every direction but himself. In short, he warns of asset bubbles and how destabilizing it can be to the system, especially when monetary policy is used as the rudder. I will not bother to point out just how silly he is making himself look, instead I will link to much better material on the subject. This is the guy who was riding co-pilot with his mentor Greenspan for all those years. This is the same guy who is currently blowing an equity bubble the size of Mars (or to Mars, whichever comes first). I'm beginning to wonder if we'll see P/E ratios run a 1:1 ratio with the S&P somewhere near eleventy-seven thousand?
Suggested Reading on Bubbles Bernanke:
Ben Bernanke Looks In Mirror, Sees Barney Frank
Fed Bubble Blowing: A Study Of Denial
Is it Possible Bernanke Has Seen the Asset Bubble Light?
My Blather on Housing
Recently Matt Taibbi opined on the recent GSE chatter (go read it). He makes the case there were many players involved in creating this bubble. I, along with most others, have acknowledged there is plenty of blame to go around. However I feel as though he is downplaying the significance of policies that created the problems. Imho, it is undeniable that without the housing mandates we would not have needed complex derivatives with phony ratings. We would not have had the lax underwriting. We would not have pushed home ownership over renting, regardless of one's income.
[1] On November 3, 1994, President Clinton to HUD Secretary Cisneros:
HUD from 1990-2000 [2]Dear Henry:
Homeownership is the American Dream. Our nation has embraced this dream since the National Housing Act of 1949 made 'a decent home and a suitable living environment for every American family' a goal of national policy. The United States is the first major industrial country to make homeownership a reality for a majority of its people. Thanks to effective cooperation between industry and government, the doors of homeownership have been opened to millions of families in the past 45 years. However, since 1980, the national homeownership rate has been declining. Reversing this trend is vital to American families, to communities, and to our economy. Homeownership strengthens families and stabilizes communities. It encourages savings and investment and promotes economic and civic responsibility. Expansion of homeownership is an integral part of the Administration's economic plan. It spurs new investment, strengthening the economy and creating jobs. A stronger economy in turn enables more people to buy homes. For all these reasons, it is in our national interest to expand homeownership opportunities for all Americans.
Today, I am requesting that you lead an effort to dramatically increase homeownership in our nation over the next six years. I would like you to work with the Assistant to the President for Economic Policy, the Assistant to the President for Domestic Policy, the Secretary of Agriculture, the Secretary of Veterans Affairs, and other private and public sector partners you may designate to develop a National Homeownership Strategy that will carry us into the 21st century. I request that you report back to me within six months, with a concrete strategy involving the private and public sectors, and all levels of government, that builds on the base of the more than 1.5 million additional families who have been able to buy their own homes since the beginning of this Administration. Your program should include strategies to ensure that families currently underrepresented among homeowners - particularly minority families, young families, and low-income families - can partake of the American Dream.
In the course of developing this strategy, you should explore ways to combine private and public sector resources and commitment to:
* Cut Costs, including financing, production, and transaction costs and fees, to make homeownership more affordable and financing more accessible;
* Open Markets, to increase choice and remove discriminatory and regulatory barriers, making homes, financing, and insurance more accessible and affordable to all Americans, and;
* Expand Opportunities, to make homeownership a reality for more people through education, information, technology, and community involvement.Previous cooperation between the private sector and the federal government has opened the doors to homeownership to tens of millions of American families, and has been one of America's greatest success stories. This new initiative to dramatically expand homeownership by the end of this century is in keeping with our nation's bipartisan tradition of public-private partnership in this arena. I welcome your commitment and involvement in this important task. I know that working together, we can make the dream of homeownership a reality for millions more families and build a better future for all Americans.
- 1990 Cranston-Gonzalez National Affordable Housing Act emphasizes homeownership and tenant-based assistance, launches HOME housing block grant. Low-Income Housing Preservation and Residential Homeownership Act of 1990 fortifies Federal commitment to preservation of -assisted low-income, multifamily housing.
- 1992 Federal Housing Enterprises' Financial Safety and Soundness Act of 1992 creates HUD Office of Federal Housing Enterprise Oversight to provide public oversight of FNMA and Federal Home Loan Mortgage Corporation (Freddie Mac).
- 1993 Henry G. Cisneros is named Secretary of HUD by President William J. Clinton, January 22. Empowerment Zone and Enterprise Community program becomes law as part of the Omnibus Budget Reconciliation Act of 1993.
- 1995 "Blueprint for Reinvention of HUD" proposes sweeping changes in public housing reform and FHA, consolidation of other programs into three block grants.
- 1996 Homeownership totals 66.3 million American households, the largest number ever.
- 1997 Andrew M. Cuomo is named by President Clinton to be Secretary of Housing and Urban Development, the first appointment ever from within the Department.
- 1998 HUD opens Enforcement Center to take action against HUD-assisted multifamily property owners and other HUD fund recipients who violate laws and regulations. Congress approves Public Housing reforms to reduce segregation by race and income, encourage and reward work, bring more working families into public housing, and increase the availability of subsidized housing for very poor families.
- 2000 America's homeownership rate reaches a new record-high of 67.7 percent in the third quarter of 2000. A total of 71.6 million American families own their homes - more than at any time in American history.
Home ownership rate at record levels was not good enough. Please consider the following snippets from an article several years old. Although I do not agree with everything in the article, it does provide a lot of insight into the root causes of the housing bubble.
National Housing Policy in the U.S. for the 21st CenturyThe Prosecution rests...
Dr. Marc A. Weiss
Chairman Prague Institute for Global Urban Development
In May 2002 the Congressionally appointed bipartisan Millennial Housing Commission issued its final report, Meeting Our Nation's Housing Challenges. This is the first major comprehensive congressional commission report on housing policy since the 1990 National Commission on Affordable Housing (the Rouse-Maxwell report). While the fact that the Millennial Housing Commission was created in 2001 indicates some level of concern by national policymakers about the lack of sufficient and decent quality affordable housing in America, the report's recommendations suggest that the current political commitment to devoting significant new resources to address this problem is extremely weak...
Currently the nation's homeownership rate has begun to drop in 2003 after 10 years of steady advances, causing some concern within the Bush Administration about a potential return to the declining homeownership days of Reagan and Bush from 1981 through 1992. This could open the door for a strong and popular issue to be vigorously raised by the Democrats in Congress and among the 2004 Presidential candidates...
Sources:
[1] National Housing Policy in the U.S. for the 21st Century
[2] HUD History
