Category Archives: housing

Are stocks and housing off on another bubble?

Alex Brummer reports:

As a new year gets under way [Nobel Laureate Robert] Shiller fears that advanced economies could be on the cusp of another stock market and property bubble that could end in tears….

“I’ve tried to inquire why we are having these booms right now at a time of so-called secular stagnation with low interest rates, and arrived at the thought that low interest rates are promoting these bubbles.”

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Winding down Fannie and Freddie

From the Daily Herald:

Speaking Tuesday in Arizona, President Obama endorsed the bipartisan efforts of [Senator Bob Corker (R-TN) and Senator Mark Warner (D-VA)] to wind down Fannie Mae and Freddie Mac as a first step in making certain that the nation does not suffer again through a housing finance crisis.

“For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag,” Obama said in Phoenix. “The good news is that there’s a bipartisan group of Senators working to end Fannie and Freddie as we know them. I support these kinds of efforts.”

Let me explain why I also endorse these recommendations.

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Understanding the housing bubble

A key reason that I was insufficiently worried in 2005 about bad mortgage loans being made at the time was that the people who funded the loans– most importantly, the packagers and buyers of private-label mortgage-backed securities– had more motivation and resources to evaluate the risks accurately than I did. That they made an incredibly costly mistake is now indisputable. But the question remains, why?

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