Who Was To Fault For The Housing Bubble?

Was it the Fed’s easy money policy? That drove up commodity prices, real estate, gold and the like.

Was it lack of adequate regulation?

Until this bust, the mortgage market was reliable. Widows and orphans invested in its bonds.

Something went very wrong over the past decade.

Economist Tom Sowell in his book argues it was the government’s fault for forcing banks to lend money to people who had a low probability of paying it back.

The LAT Says:

Federal Reserve Chairman Ben S. Bernanke said that the central bank’s low interest rates didn’t cause the last decade’s housing bubble and that better regulation would have been more effective in limiting the boom.

“The best response to the housing bubble would have been regulatory, rather than monetary,” Bernanke said Sunday in remarks at the American Economic Assn.’s annual meeting in Atlanta. The Fed’s efforts to constrain the bubble were “too late or were insufficient,” which means that regulatory actions “must be better and smarter,” he said.

Bernanke said the Fed was working to improve its supervision of banks and had strengthened measures to protect consumers of mortgages and other financial products. But he didn’t rule out raising interest rates to stop new speculative investment bubbles from forming.

The Fed chief’s remarks were his most extensive on the subject since the housing market’s tumble led to the gravest financial crisis since World War II — and perhaps the worst in modern history, in his view.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
This entry was posted in Banks, Rates and tagged , , , , , . Bookmark the permalink.