Sunday, December 21, 2008

The Housing Crash: One Lesson

Clearly, GWBush is clueless about a number of things, and certainly contributed to the housing crash. But the NYTimes article which pins the tail solely on the White House is over the top.

First clue, as Calculated Risk points out: there's NO mention of "Easy Al" Greenspan, whose monetary policy was .....ahhhhh...... nuts.

But then, the White House did make some errors, the worst of which was taking for granted that "good social policy" can be implemented if only the Gummint pushes hard enough.

Another big error: ignoring the rent-to-own ratio.

As Mr. Thomas began digging into New Century’s failure that spring, he became fixated on a particular statistic, the rent-to-own ratio.

Typically, as home prices increase, rental costs rise proportionally. But Mr. Thomas sent charts to top White House and Treasury officials showing that the monthly cost of owning far outpaced the cost to rent. To Mr. Thomas, it was a sign that housing prices were wildly inflated and bound to plunge, a condition that could set off a foreclosure crisis as conventional and subprime borrowers with little equity found they owed more than their houses were worth

It was an astute observation, made almost two years ago...

Take the article with a grain of salt, but take a lesson, too: "social goals" are nice to have, but might be impossible to implement, regardless of how much money the Feds can throw around.

Think Congress and the new President will get it?

4 comments:

Other Side said...

I thought the article was a very fair look at the errors made by the White House, and the others culpable too, like Congress.

I don't know about the future Congress, but I'll bet the new President will "get it" a lot better than the soon to be former.

Dad29 said...

Nope.

The Times also whitewashed Congress in its article.

The Administration pushed for more oversight of Fan/Fred, but the frauds who ran those organizations were able to purchase Barney Fffffffrank and Chris Dodd.

Sorry, the Times' article sucked. Little knowledge displayed; the inverse of its political content.

Deekaman said...

Social goals are generally impossible to implement. 50 years of failed social policy seems to confirm that.

There are about 300 million people in this country responsible for the current economic mess. In housing, we had people who bought without doing their homework, sellers who wanted a fast buck, realotors who said, "buy as much home as you can afford", not "buy as much home as you need" and mortgage banks more than happy to sell mortgages to anyone, anytime, anywhere....after all, the government would take care of it in the end.

I haven't read the entire article yet, but what I've seen and heard indicates, yeah...it's a hatchet job by a total hack.

asianbadger said...

The planet on which "Other Side" lives must be a terrifying place.

The article completely missed the policies and "bribes" by Bawny Fwank and Chris Dodd. Not to mention the management at Fannie and Freddie.

And "The Times" wonders why their debt has junk status.