Editor Pick – Housing, Housing Finance, and Monetary Policy
Ben S. Bernanke delivered today the opening speech at the Federal Reserve Bank of Kansas City’s Economic Symposium in Jackson Hole, Wyoming.
Even if it came the weekend before Labor Day, some were calling it the most important speech of his career on the wake of the sub-prime crisis and the recent financial turmoil.
Here are some relevant points of Bernanke’s prepared remarks:
- uncertainty about possible forced sales by leveraged participants and a higher cost of risk capital seem to have made investors less willing to assume risk
- borrowers face noticeably tighter terms and standards for all but conforming mortgages
- global financial losses have far exceeded even the most pessimistic projections of credit losses on those loans
- if current conditions persist in mortgage markets, the demand for homes could weaken further, with possible implications for the broader economy
- delinquencies among subprime adjustable-rate mortgages are likely to rise further
- cutback in residential construction has directly reduced the annual rate of U.S. economic growth about 3/4 percentage point on average over the past year and a half. Despite the slowdown in construction, the stock of unsold new homes remains quite elevated relative to sales, suggesting that further declines in homebuilding are likely
- the uncertainty surrounding the outlook will be greater than normal
- the Fed stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of markets
Note that Bernanke made no reference in his prepared speech to inflationary risks.
No Responses to “Editor Pick – Housing, Housing Finance, and Monetary Policy”
Here we go with politicians putting their two stupid cents into the free market. Why not just become a socialist nation. Bail out BANKS, BROKERS, CONSTRUCTION INDUSTRY, REAL ESTATE, HUCKSTERS & SWINDLERS. I suppose the 350 billion of new garbage securities can be sold now. Go ahead and drop the interest rates to 2% and see what happens. The blind leading the blind believing their own BS. What heroes,the same incompetent people who should have been minding the store want their day in the sun. What will they do to the U.S. dollar?
I just read the entire Bernake speech and frankly I do not know why the FED reacted at all. It appeares that the happenings of the last several weeks in the credit and housing markets was inevitable and necessary. It is a perfect example of our free market in operation. There was a need for repricing of risk and it occured and those that can not tolerate the adjustment should not be bailed out; that includes Wall Street who are the biggest benefactors of the FED move. It is quite clear that Mr. Bernanke capitulated to both private and political pressures. There was no need to jump in so quickly for our efficient markets would have resolved this issue more efficiently. We have postponed the problem and probably exasperated it. Moral Hazard indeed.
Now Feldstein is jawboning for a rate cut. Where were these people a few months ago? They have crawled out of the woodwork, literally. He even states that inflation is a potential consequence. STAGFLATION and DEVALUED CURRENCY will be the consequence. Who will crawl out of the woodwork then? I say the recession is BETTER and more HEALTHY for the economy than what these people propose. Also, they do not believe in the free market system and are becoming Socialist/Communist or worse. Has the U.S. now become a gigantic incompetent BANANA REPUBLIC ? They must not turn the dollar into toilet paper.