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Is the Obama Administration Still Clueless on Housing Bubble?

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Thursday, 03 March 2011 06:15

The NYT implied that the Obama administration, which includes not a single economist who recognized the danger of the housing bubble, still does not understand the bubble. According to the NYT:

"the Obama administration, as well as the F.D.I.C., sees any broad settlement with the servicers [over improper foreclosure actions] as an opportunity to do more than just fix the foreclosure process. They want to stabilize the housing market, where prices are continuing to decline, and try to help bolster the economic recovery."

Actually nationwide house prices are still 10-15 percent above their trend levels. The housing vacancy rate, while down somewhat from its peak, is still far higher than any pre-bubble level. In other words, the Obama administration should fully anticipate that house prices will continue to fall. There is no obvious reason to want to prevent house prices from returning to more affordable levels.

Unfortunately the piece does not point out the absurdity of the position attributed to the Obama administration. Nor does it identify any of the officials holding this view so that they can be subjected to the ridicule they deserve.

Comments (5)Add Comment
...
written by izzatzo, March 03, 2011 7:11
There is no obvious reason to want to prevent house prices from returning to more affordable levels.


The problem with free market economists like Dean Baker who want to let the market work to adjust to a housing surplus with declining prices is that this interferes with mainstream free market economists who want the market to work with government intervention to keep prices stable.

Psychologists have come to recognize this condition among highly paid economists as Abodus Surplitus Phobitus, easily identified by involuntary twitching of the eyebrows and quivering lips whenever the data shows further declines in house prices despite government intervention to prevent it.

The only cure for this disease is to restore the ego by labeling Baker as a free market socialist.
...
written by cemmcs, March 03, 2011 7:37
Nor does it identify any of the officials holding this view so that they can be subjected to the ridicule they deserve.


LOL
Is the Obama Administration (Specifically Treasury) Still Clueless on the Housing Bubble?
written by sherparick, March 03, 2011 12:29
Yes.

Secretary Geithner I think is still puzzled why he could not get his asking price for his former home. http://nymag.com/daily/intel/2...ell_h.html
The problem was and is
written by Floccina, March 03, 2011 2:35
The problem was and is that more voters are home owners than are would be home owners or soon to be home buyers. So politicians liked the bubble when it was happening and do not like the correction now.
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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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