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Finance | Banking | Monetary Policy

Is Too Much Homeownership a Good Thing?
e21 Team | 2012-01-24

For generations the assumption among market participants, policymakers, and the general population has been that increased homeownership is a positive for the U.S. economy. An essay out of the Richmond Fed questions this assumption and expands on the risks of subsidizing homeownership. Against the backdrop of the SOTU and the likely inclusion of some new housing policy, the analysis from this essay should be a helpful reminder that there is a lot that we still don’t know about the effects of homeownership and its relationship to the health of the aggregate economy.

The Fed’s Pyrrhic Victory
e21 Staff Editorial | 2012-01-18

Increased consumption by households accounted for 70% of GDP growth in the second half of 2011. This increase in outlays was almost entirely due to the fall in consumer savings. The boost in the economy, therefore, is coming from a rise in the proportion of household income that is being spent, not an increase in household income. Is this sustainable?

What Will Cordray Do at the CFPB?
e21 Team | 2012-01-11

The January 4th recess appointment of Richard Cordray as the director at the Consumer Financial Protection Bureau prompted a substantial controversy because the Senate was not actually in recess. Given the important discussions of the substantive legal and political implications of the appointment, less attention has been paid to the policy implications that Cordray’s appointment may have on new regulatory, supervisory, and enforcement responsibilities in 2012.

Reflections on Barney Frank’s Legacy
e21 Team | 2011-11-30

Now that former House Financial Services Committee Chairman Barney Frank has announced that he will retire from Congress at the end of next year, policy analysts can begin to access the legacy of one of the most significant lawmakers of the past generation.  His legacy will be forever linked to both his strident defense of Fannie Mae and Freddie Mac and the 2,000 page Wall Street Reform and Consumer Protection Act, which is also known as the Dodd-Frank Act.

New Appropriations Bill, Same Budget Gimmick
Jason Delisle | 2011-11-08

This year looked like a golden opportunity for Congress to show taxpayers what the Federal Housing Administration’s loan guarantees really cost and budget accordingly. But lawmakers are about to let the opportunity pass by.

Europe's Problems Deepen With Greek Vote
David Malpass | 2011-11-01

The euro began weakening sharply at 2pm EDT yesterday when Greece’s Prime Minister Papandreou announced his intention to seek another vote of confidence late this week and then hold a national referendum on Europe’s deal with Greece (130 billion euros in new aid and a 50% debt haircut in return for austerity measures.)  The Dow lost 150 point from 2pm to the market close.

Fannie and Freddie Updated Cost Estimates
e21 Team | 2011-10-28

On Thursday, the Federal Housing Finance Administration (FHFA) announced that the total net cost of the Fannie and Freddie bailout could be as low as $121 billion, or about 0.8% of GDP.  Some misinterpreted the new estimates as a substantial reduction in the cost of the bailout and contrasted the new figure with the $389 billion estimate from the Congressional Budget Office (CBO) from January 2010.

Rage Against the Machine They Protected
e21 Staff Editorial | 2011-10-26

The Obama Administration’s policy response to the financial crisis has helped to cultivate a sense that “Wall Street” plays by a different set of rules than the rest of the American economy. The inability to diagnose and solve the very specific problems that became evident after Lehman has triggered more widespread dissatisfaction and unfocused anger, as evidenced by the “Occupy Wall Street” protests. Unfortunately, even at this late date, the President appears to prefer to attack profit motives more generally rather than confront the ways large banks are sheltered from market forces.

Feldstein’s Mortgage Proposal: No Silver Bullet
e21 Team | 2011-10-19

Martin Feldstein has recently published  a provocative op-ed arguing for a large-scale mortgage write-off program to counteract housing losses. Feldstein is highly influential economist who has served numerous roles in public policy, so his views are worth considering. His latest piece, however, offers a weak defense of an expensive and unfair housing policy.

Who Pays? Bondholders or Taxpayers
e21 Team | 2011-10-13

The ongoing worries of another financial crisis, perhaps induced by a European sovereign default, center on the role of bank solvency. If the financial system experiences another systemic default, banks will take large losses, and some may be forced to raise capital. To deal with the ensuing bank runs and fear, governments may well step in to bail out bankers. Even if nothing worse happens, taxpayers may well be on the hook for large amounts of money lost at major financial institutions.


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