Washingtonpost news updates: Editorial Board: Can the government fix housing?

Sunday, January 22, 2012

Editorial Board: Can the government fix housing?

Can the government fix housing? - The Washington Post Print SubscriptionConversationsToday's PaperGoing Out GuideJobsCarsReal EstateRentalsClassifiedsHomePoliticsCampaign 2012CongressCourts &LawThe Fed PageHealth CarePollingWhite HouseBlogs & ColumnsIssues: EnergyTop Blogs

Election 2012 | Felicia SonmezThe Fix | Chris CillizzaFederal Eye | Ed O’KeefeFact Checker | Glenn KesslerOpinionsAll OpinionsPostPartisanLeft-LeaningRight-LeaningTolesCartoonsTelnaesAnimationsLocalColumnist IndexLocalDC: Politics| NewsMD: Politics| CommunitiesVA: Politics| CommunitiesCrimeEducationOn Faith/LocalObituariesTraffic & CommutingWeatherBlogs & ColumnsThe Root DCTop Blogs

State of NoVa | Loudoun supervisor’s anti-gay campaignThe Buzz | Post’s Air Florida coverage from 1982Where We Live | A $3.19M home with 67 windowsGoing Out Gurus | Plan your weekendSportsRedskins/NFLCapitals/NHLWizards/NBANationals/MLBDC United/SoccerCollegesAllMetSportsOther SportsBlogs & ColumnsTop Blogs

The Insider| Mike JonesCapitals Insider| Katie CarreraWizards Insider | Michael LeeNationals Journal| Adam KilgoreNationalCorrectionsEnergy & EnvironmentHealth & ScienceHigher EducationNational SecurityOn FaithOn LeadershipInnovationsOn GivingBlogs & ColumnsTop Blogs

Ideas@InnovationsPost LeadershipUnder GodCheckpoint WashingtonWorldAfricaTheAmericasAsia &PacificEuropeMiddle EastNational SecurityWar ZonesSpecial ReportsCheckpoint WashingtonBusinessEconomyIndustriesLocal BusinessMarketsPolicy&RegulationTechnologyWorldBusinessBlogs & ColumnsInnovationsOn Small BusinessTop Blogs

Wonkblog | Ezra KleinPost Tech | Cecilia KangFaster ForwardPolitical EconomyInvestigationsLifestyleAdviceCarolyn HaxFoodHome & GardenStyleTravelWeddingsWellnessMagazineKidsPostTop Blogs

Arts PostAll We Can EatReliable Source | Roxanne Roberts & Amy ArgetsingerOn Parenting | Janice D’ArcyEntertainmentBooksCelebritiesComicsGoing Out GuideHoroscopesMoviesMuseumsPuzzlesTheater & DanceTVTop Blogs

TV Column | Lisa de MoraesCelebritology | Jen ChaneyClick Track | Chris Richards & David MalitzComic Riffs | Michael CavnaMultimediaInnovationsPhotosVideosThe Washington PostMake us your start page

PersonalizeThe Washington PostAll OpinionsPostPartisanLeft-LeaningRight-LeaningTolesCartoonsTelnaesAnimationsLocalColumnist IndexIn the NewsMLK memorial NFL playoffs Italian cruise ship iPad 3 Michelle Obama Krauthammer ???initialComments:true! pubdate:01/14/2012 19:01 EST! commentPeriod:14! commentEndDate:1/28/12 7:1 EST! currentDate:1/14/12 8:0 EST! allowComments:true! displayComments:true!

Romney and the ‘Bain way’

Correcting the King Memorial mistake

JoePa’s first interview since scandal

Your beautiful sunset photos

The Post’s ViewCan the government fix housing?

Text SizePrintE-mailReprints By Editorial Board,

EVEN AS THE U.S. housing market was at the top of what we now know was a disastrously unsustainable boom, top officials of the Federal Reserve had no clue about the looming bust, according to newly released transcripts of internal Fed deliberations. “I think we are unlikely to see growth being derailed by the housing market,” newly installed Chairman Ben S. Bernanke said in March 2006, precisely the moment at which home prices were peaking. As late as December 2006, Mr. Bernanke was still predicting “a soft landing.” Timothy F. Geithner, then-president of the New York Fed and now Treasury secretary, voiced general agreement.

There’s a lesson here. It’s not that Mr. Bernanke and Mr. Geithner are a couple of incompetents. Rather, the point is that even brilliant and conscientious public officials are susceptible to inertia and conventional wisdom or incomplete information. As a result, there will always be a limit to government’s ability to foresee “systemic risk,” let alone act against it in a timely manner.

Comments

Weigh InCorrections?

Washington Post Editorials

Editorials represent the views of The Washington Post as an institution, as determined through debate among members of the editorial board. News reporters and editors never contribute to editorial board discussions, and editorial board members don’t have any role in news coverage.

Read more

Latest Editorials

Can the government fix housing? Editorial Board

Not even the smartest public servants are immune from conventional wisdom.

Ending the FCC’s arbitrary indecency policies Editorial Board

The Supreme Court should strike down the current regime.

Checking Metro’s fares Editorial Board

Without structural reforms, Metro fares will continue to rise.

The Dodd-Frank regulatory reform bill set up a Financial Stability Oversight Council to spot the next catastrophic threat. The group has issued its first report, and, while it’s a perfectly sound work, there’s not much you couldn’t find in any number of think-tank pieces. Sample sentence: “The impact on the U.S. financial system of events in Europe depends on how the peripheral European sovereign debt crisis evolves and on the resilience of U.S. financial institutions and markets.”

It is a little surprising, in this light, to see the Federal Reserve wading into the policy debate over how to fix the housing market now. On Jan. 4, Mr. Bernanke sent an unsolicited memorandum to the relevant Senate and House committees, outlining a series of measures. The Fed is no doubt right to worry that bottlenecks in housing credit have limited the stimulative impact of the Fed’s low-interest policy. The question is whether the benefits of the options it described to Congress necessarily outweigh the risks.

In particular, the Fed memo calls on Fannie Mae and Freddie Mac to do still more to subsidize housing finance by relaxing conditions for refinancing and speeding the conversion of foreclosed homes in its possession to rental properties. The problem, as the memo recognizes, is that this would add to Fannie and Freddie’s potential losses at a time when they are in government receivership, dependent on taxpayer funding and, as such, legally bound to minimize their losses.

The Fed memo suggests that its recommendations would, in a sense, pay for themselves — that “greater losses to be sustained by the .?.?. [government-sponsored enterprises] in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery.” But obviously there’s no guarantee of that.

Congress ought to weigh the Fed’s ideas seriously, with due skepticism. Housing needs help, but most government attempts to fix the market so far have underperformed or failed outright. If this crisis has taught us anything, it’s that risks might be hiding anywhere — and even the Fed doesn’t necessarily know what it doesn’t know.

EmailTumblrRedditStumbleuponDiggDeliciousWeigh InDiscussion PolicyAbout Discussions, Badges Newest firstOldest firstMost Recommended first SuperFan Badge

SuperFan badge holders consistently post smart, timely comments about Washington area sports and teams.